The 36-year-old has decided to hang up his boots in order to take the role of technical assistant.
Toure spent one year at Celtic Park as a player, featuring 17 times as Celtic won the domestic treble and reached the group stages of a Champions League.
With Dedryck Boyata and Jozo Simunovic out injured, the Ivorian was an integral part of the Celtic line-up in the opening months of the season before becoming a reserve player as the campaign progressed.
Manager Brendan Rodgers said earlier this year that Toure would always be welcome to join the coaching staff, and it appears after much soul searching the centre-back has decided to take him up on his offer.
Rodgers told the Celtic website: “This is great news for Celtic that we are able to bring a man of Kolo’s experience into our coaching team. In everything he does, he is quite simply a fantastic example to anyone.
“He has worked at the top of the game for so many years and he has all the qualities which any player of any age should aspire to. He is a fantastic role model for our younger players and someone who has a level of experience and knowledge which can only be invaluable to our established players.”
“We are delighted that we will benefit from this experience and I know will make a real contribution to the club in this role.”
Toure added: “I couldn’t be happier to be back at this great club.
“This is a new chapter in my career, a new beginning. The football is over now. I can officially say I am retired from playing and now I am fully concentrating on coaching.
“For me there is no big change in terms of what I will be doing. I have always been the kind of player who tries to help those around me.
“Now I will try to give advice, help the young players and just guide them and pass on all the experience I have acquired during my career.”
He added: “I can learn so much from working with Brendan Rodgers, he is a top manager. I will be working with him and his staff very closely each day.
“He is one of the best young managers in the world right now. What he’s doing for Celtic is there for all to see, he’s doing amazingly right now.”