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.