Lee handed Reds position May 16 2008
Sammy Lee took up his appointment as Liverpool's new assistant manager.
The Anfield playing legend was at the club's Melwood training complex on Friday morning to start his new job.
The 49-year-old returns to the Reds after being sacked as Bolton manager earlier in the season.
He has been appointed by boss Rafael Benitez following the departure earlier this month of first-team coach Alex Miller to take up a management job in Japan.
Benitez said: "We are very pleased to have brought Sammy back to Liverpool because he is someone who knows the club really well.
"He also knows about the passion of the club and about the standards that we set here so that will make it much easier for him to settle into his new role.
"But we have not brought Sammy back simply because he used to play for the club and used to work here as a coach.
"He is a very experienced and very well respected coach in his own right and his reputation in football made him the outstanding candidate when we knew we were looking for a new member of our coaching staff.
"He will add something different to what we already have and it will be good to work with him.
"I already have a good relationship with him and I will be looking to build on that in the weeks and months to come."
Lee added on liverpoolfc.tv: "I have been away for a while but everyone knows what this club means to me and it is a great pleasure to be back.
"When a club the size of Liverpool comes in for you, and when a manager of the magnitude of Rafael Benitez wants you, then you cannot say no. When I found out they were interested in me I was really thrilled.
"After the sabbatical I have had I just wish the season was starting tomorrow, but the players have had a long, difficult and demanding season and they need to get away and get their batteries recharged.
"I have been around the Melwood training ground this morning and seen a lot of old faces but a lot of new faces as well.
"I have shaken hands with everyone and introduced myself. There are some great people here and I cannot wait to get working with them. It is so nice to be back."
He continued: "I was very honoured and privileged to be given the position as Bolton manager.
"The pride and the honour I felt to be their manager was only outweighed by the sheer disappointment that it did not go well.
"I have to say the Bolton fans were fantastic towards me. I have not had the chance to say that before but I want to thank them.
"Even when results were not going well they were very supportive towards me and, most importantly, to the players."
But now he is back at the club he has supported since he was a boy.
He said: "I think the club have made great progress over the last few years and they were so close to having a great season this time around. Hopefully we can keep improving and get to where we all want."
As a player Lee won the title, the League Cup and European Cup during the 1980s before taking on a role as reserve coach and then first-team coach at the club under Graeme Souness and Gerard Houllier, respectively.
He effectively replaces Pako Ayesteran, who left the club at the beginning of the 2007/08 season.