The Football Association (FA) said she would work with Neville for the annual SheBelieves tournament in the United States next month and qualifiers for the 2019 World Cup in France.
"Although I am sad to be hanging up my boots, I do so proud of what I have achieved and with great optimism about what the future holds for the women's game," Stoney said in an FA statement.
"With that in mind, I am hugely excited about starting my next chapter as part of Phil Neville's Lionesses backroom team.
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"I am thoroughly looking forward to working with Phil, who is an excellent choice to take the women's game forward," added the 35-year-old Liverpool defender, who played 130 times for the national side.
She made her England debut as a teenager in 2000 and captained the British team at the 2012 London Olympics before being part of the England squad that finished third at the 2015 World Cup in Canada.
Neville was appointed national coach in January after Mark Sampson was sacked last September for "inappropriate and unacceptable behaviour" in a previous job.
Former England and Manchester United defender Neville has faced criticism for his lack of experience of women's football, while also apologising for comments made on Twitter in 2011 and 2012.
"Casey has been a wonderful player for England and I am delighted she will continue to help the team with her new position," said Neville of the veteran of three World Cups.
"She has tremendous knowledge of the game and will be invaluable in helping us to take the team up another level... I am sure Casey will go on to have a coaching career that rivals what she did on the pitch." (Reporting by Alan Baldwin, editing by Christian Radnedge)
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