The former England international announced his retirement as a player last week after his short-term spell at Danish side Aarhus GF came to an end.
Wilshere had returned to London Colney over the winter to work on his training badges and was tipped to re-sign for the club amid their lack of midfield options.
Mikel Arteta repeatedly ruled out the prospect of Wilshere playing for Arsenal again, and the 30-year-old would contribute three assists in 15 matches for Aarhus in all competitions.
The midfielder's injury-hit playing career has now come to an end, but he will now oversee the development of Arsenal's Under-18 prospects alongside assistant Adam Birchall.
"It's a huge honour to have this role. It's no secret that I love this club. I love what we stand for and a big part of my life was spent in this academy, some of the best days of my life," Wilshere told arsenal.com.
"This is a big opportunity for me and I'm ready. I'm hungry and can't wait to help these young players thrive and be the best they can be on and off the pitch.
"It's a special feeling to be part of the Arsenal family. It never left me, and even though I moved on for a few years, my heart was always still at Arsenal. I can't wait to get started and help these young players thrive with a great team around me."
Academy manager and former Arsenal centre-back Per Mertesacker added: "This is great news for everyone involved in our academy. We have made a number of really positive changes in the last few weeks and I believe that we have the best possible people here to build on the progress that we've made in recent years.
"Everyone knows how passionate Jack is about Arsenal. He understands what we want to achieve here and he really impressed us last year. He knows exactly what it takes to progress through the academy into first-team football."
Wilshere learned his trade in the Arsenal academy and still holds the record of being the club's youngest-ever Premier League player at 16 years and 256 days against Blackburn Rovers in September 2008.
The Englishman recorded 14 goals and 30 assists in 197 appearances for the Gunners in all tournaments and won two FA Cups and one Community Shield during his playing career.
Wilshere has been appointed to the Under-18s post to replace Dan Micciche, who left after four years at the club to become Kevin Betsy's assistant at Crawley Town.
Betsy left his role as Arsenal Under-23s manager to take the manager's job at Crawley Town, and Mehmet Ali has now been appointed to take charge of the Gunners' Under-21 side.