Neville, who has been working as a television commentator since his retirement towards the end of last season, has signed a four-year contract with the FA.
The 37-year-old will join up with fellow coaches Ray Lewington, Ray Clemence and Dave Watson in time for Euro 2012.
Hodgson told the FA's official website: "Gary has achieved so much in the game as a player with Manchester United and England.
"He has obtained UEFA coaching qualifications and will be tremendously respected by the players because of his vast experience as a player.
"At my first meeting with The FA, I explained that Gary was someone I wanted as part of my staff. I think it is very important we have a younger coach who knows the dressing room and is very experienced at international level.
"That he has represented England as a player at five major finals tournaments will make him an invaluable member of staff."
Neville said: "Roy asking me to be a part of his staff and to work with the national team is not only an honour but a very special moment for me.
"I had absolutely no hesitation in accepting this role and I am relishing the opportunity to work alongside Roy and the team at the Euros and through to the next two tournaments."
Neville is England's most capped right-back with 85 appearances and won a host of titles during his time with United.
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