The 44-year-old assumed the position of technical director with his former club in July 2019, having previously served upstairs with Corinthians, Iran and Brazil.
In that time, Edu has overseen the departure of Unai Emery and hiring of Mikel Arteta, as well as having a hand in numerous transfer dealings over the past few years.
Edu has been credited with persuading the likes of Gabriel Jesus to join the Gunners in the summer, and the North London club sit five points clear at the top of the Premier League table.
Arsenal have never previously appointed a sporting director, but Edu - a former Invincible - will now take on the responsibilities of the role, which includes a greater influence on the youth teams alongside academy manager Per Mertesacker.
Speaking to arsenal.com following his promotion, Edu affirmed that he is excited to "move forward" with the Gunners, having apparently attracted interest from other clubs.
"I'm delighted to have this new role which I see as an evolution and consolidation of the way we've been working. We are making good progress in all areas of our men's, women's and academy and we are all excited about what can be achieved," the Brazilian said.
"I look forward to building on the hard work of so many people and helping all of us grow together and enjoy more success, and am thankful for the trust the club has put in me. We move forward together."
Chief Executive Vinai Venkatesham added: "We are delighted that Edu is recommitting his future to the Club that he so clearly loves, after making such a positive and critical contribution to our progress in his time with us so far.
"Edu's promotion formalises his already growing influence over our Academy operations, and we look forward to Per and Edu working together to strengthen the integration between our men's first-team and Academy yet further."
Edu initially joined Arsenal as a player from Corinthians in the January 2002 transfer window, and he became a prominent member of the team under Arsene Wenger, winning the Premier League and FA Cup double in his first half-season.
During the Gunners' 2003-04 unbeaten season, Gilberto Silva and Patrick Vieira formed Arsenal's first-choice midfield pairing, but Edu still contributed two goals and two assists in 30 top-flight appearances.
The midfielder won one final FA Cup with Arsenal in 2004-05 before leaving for Valencia, having amassed 15 goals and six assists in 127 matches for Wenger's team.
Edu also earned 16 caps for the Brazil national team and enjoyed one final stint at Corinthians before retiring in 2011, after which he became their director of football.
Arsenal have won the FA Cup and Community Shield with Edu as technical director and will return to Premier League action on Boxing Day against West Ham United following the World Cup.
During the domestic break, the Gunners have announced that they will take on Lyon and AC Milan in the Dubai Super Cup, where Liverpool will also compete.