Elway, who led the Broncos to two Super Bowl victories during his 16-year Hall of Fame playing career, was a marketing consultant for the team this past year. He also spent eight years as a co-owner and chief executive of an Arena Football League team, the Colorado Crush.
Broncos owner Pat Bowlen called Elway a "perfect fit for this role."
"John Elway's leadership, competitiveness and passion for the Denver Broncos will position this team for long-term success through his work leading our football operations," Bowlen said in a statement. "John has won championships as both a player and executive, and his experience will be a valuable addition to this franchise."
Elway said the Broncos "are in my blood" and is thrilled to be back with the NFL team.
"My greatest asset is my competitiveness, and I will give everything I can to return this team to where it was," Elway said.
The Broncos have missed the playoffs for five years and went 4-12 this season, firing Coach Josh McDaniels along the way. Elway will be looking for a permanent coach after Eric Studesville handled the coaching duties the final three games of the season.
The Broncos also named Chief Operating Officer Joe Ellis the club's president.
Millions of Getty images now available for free via embed tool
Aaron Carter is still in love with Hilary Duff