The 42-year-old, who made over 200 appearances for Newcastle before spells with Everton, Aston Villa, West Bromwich Albion and Sheffield Wednesday, will assist manager John Askey in the day-to-day running of first-team matters.
Watson has previously worked in coaching roles with Huddersfield and Birmingham City and will now look to further his experience with the Silkmen.
Watson said: "I'm pleased and excited to be joining Macclesfield Town.
“It`s a fantastic club with a great group of players and John has done a fantastic job in getting us so close to the play-offs over the last two seasons. My job is to help us push over the line and that has got to be the goal.
"We looked one of the best teams in the last twelve games of the season. We were hard to beat but we coupled that with playing good football and the aim is to put that final quarter of last season in to all four quarters of the new season.
"Personally this is next progression for me. I have learned a lot about the National League with my role with BT Sport and helping John out last season and hopefully I can help us get over the line".