McGhee, who was capped just four times, enjoyed notable success alongside Strachan under Sir Alex Ferguson at Pittodrie in the 1980's, culminating in the European Cup Winners' Cup triumph over Real Madrid in 1983.
Strachan recommended McGhee for the then-vacant Scotland manager's position in November 2007. However, despite making the shortlist of candidates, he was overlooked by the SFA, who plumped for George Burley.
Strachan said: "Mark is not just a fantastic coach but a fantastic person. The enthusiasm he brings to the training ground will be a huge asset to me and to the squad."
McGhee said: "I am immensely proud and honoured to be asked by Gordon to assist him as National Coach.
"There are few more passionate Scots around that Gordon and I am hugely excited by the challenge.
"Prior to Gordon's appointment, I had been scouting for Craig Levein so I am aware that we have a very exciting squad of players to work with and I look forward to helping Gordon realise his vision for the national team."
McGhee, who had had previously managed Wolves, Brighton and Millwall as well as Motherwell and Aberdeen, was dismissed from his position as manager of League Two Bristol Rovers in December.