Ilgauskas' job will include evaluating amateur and professional prospects.
"I am really excited to come back to the Cavaliers, a team that I have so much history with and contributing to our future success," Ilgauskas said in a release. "I'm also looking forward to learning more about this game that I love so much and working with [General Manager] Chris Grant and the rest of the organization in every way that I can."
Ilgauskas, 36, wound up his playing career last season with Miami, but the rest of his 13 NBA seasons were spent with the Cavaliers, who picked him 20th overall in the 1996 draft.
He holds the club record for games played, rebounds and blocks, and is second in points.
"We are very pleased to have Z begin the next phase of his basketball career with the Cavaliers and I am looking forward to working closely with him," Grant said. "Z has always had a great desire to learn and succeed and he already has a deep understanding and appreciation of the game and the NBA. We are extremely happy to welcome him back as part of our franchise."