Yzerman, 53, spent the last eight years as the general manager and vice president of the Tampa Bay Lightning before resigning from the role in September 2018 with one year remaining on his contract.
Yzerman was joined by former general manager Ken Holland and owner Christopher Ilitch during the announcement.
Holland will remain with Detroit, signing a multi-year extension while moving into a senior vice president position. He previously served as Red Wings GM beginning in 1997.
Rebuilding the Red Wings "will take some time," Yzerman said Friday, according to the Detroit Free Press' Helene St. James. He asked for patience from the club's fan base.
Yzerman led the Lightning to one Stanley Cup Final in 2015 and won the NHL General Manager of the Year award that season. The Hall of Famer spent his entire 22-year playing career with Detroit, winning three Stanley Cups as captain and amassing 1,755 points.