"I am really very proud and excited to be given this opportunity. I have been brought-in to help, but I also expect to learn a great deal from working alongside John Toshack and Roy Evans," said Saunders, who was a £2.9m record buy for Liverpool in 1991.
"I was always honoured to wear the Welsh jersey and I know I will get the same feeling by being a part of the coaching team and helping John build his side for the future."