The former Gunners defender, who had been working in the club’s youth set-up, has replaced Pat Rice as Arsene Wenger’s deputy following the Gunners’ great’s recent retirement.
Former reserve-team coach Neil Banfield has become the club’s new first-team coach.
“It is more than excitement, it is an absolute privilege and an honour,” Bould told Arsenal Player.
“I know I have some big boots to fill with Pat having spent 44 years at the club and that is going to be the hard part. I will be learning on the job a little bit but myself and Neil Banfield are more than excited.”
Wenger added: “I have always felt it is important to have people around who understand what this great club is all about.
“With Steve and Neil joining the first-team staff, it ensures we carry forward our traditions and approach in a consistent way.
“I am looking forward to working closely with Steve and Neil and wish them every success.”
Bould took charge of the Arsenal youth team in 2001, leading them to the 2009 Youth Cup and consecutive FA Academy Premier League titles.
The 49-year-old made 372 appearances as a player for Arsenal from between 1988 to 1999, winning three league titles, two FA Cups, a League Cup and the European Cup Winners’ Cup in 1994.
This season saw Arsenal finish third in the Premier League but the London club have gone seven years without a major trophy since winning the 2005 FA Cup.