Watling represented the Black Caps in 75 Tests, 28 ODIs and five T20Is before retiring in 2021 following New Zealand's victory in the World Test Championship final against India.
He has coached New Zealand domestic teams Wellington Firebirds and Northern Districts, winning the 2025-26 Super Smash and 2024-25 Plunket Shield titles with the later.
"I'm incredibly excited," Watling said. "To come back into the team and work with this current group is a special opportunity and one I don't take lightly.
"What this side and the support staff have achieved together over recent years has been remarkable, so I'm looking forward to contributing to a world-class side."
New Zealand Test captain Tom Latham added: "BJ is a guy who personified what it means to be a Black Cap, so having someone like him come back into the group will be great for our environment.
"There was never any doubt about his effort and determination every time he stepped onto the field, and I'm sure that same attitude will translate in his coaching style."