Terry was part of the coaching set-up at Leicester under Dean Smith at the end of season but left the Foxes following their relegation from the Premier League.
Before his stint at Leicester, Terry had been working in the Chelsea youth set-up.
He was working with Mark Robinson’s Under-21s and Chelsea have decided to bring him back for next season.
Terry made 715 appearances for Chelsea as a player, winning five Premier League titles, five FA Cups, three League Cups, the Champions League and the Europa League.
“I’m delighted to be back home working in the Academy,” tweeted the 42-year-old.
Terry is the latest Chelsea legend to be brought back to Stamford Bridge after Frank Lampard returned for a spell as caretaker manager last season following the sacking of Graham Potter.