The 61-year-old, who is currently Arsenal's head of youth coaching, has previously worked at the Hawthorns under now-England manger Roy Hodgson during the 2011/12 season
Burton will work alongside Richard Garlick, who has operated as sporting and technical director for the past 14 months and will become director of football administration
West Brom chairman Jeremy Peace said in a statement: "It's great to welcome Terry back to the club
His knowledge and experience of the game is second to none
"Terry made a lasting impression during his time here two seasons ago and comes highly-recommended for his new role.
"Richard has worked tirelessly as sporting and technical director and remains a key member of the board.
"However, with the responsibilities of the position becoming increasingly wide-ranging, we felt it would be wise to split the role.
"The appointment of Terry, who has vast experience of coaching, developing young players and identifying talent, can only strengthen the club."
Following the announcement of his appointment, Burton said: "I really enjoyed my previous spell at Albion and I'm delighted to be coming back
"It's a terrific football club and this is a new, exciting chapter in my career."
Burton will work with the coaching and recruitment staff in identifying players that will improve the squad
He will also join Garlick, the rest of the board and the new head coach in the decision-making process regarding the signing of new players.
Albion announced on Monday they had parted company with Pepe Mel, who only took over as their head coach in January, by mutual consent.
Source : PA
Source: PA