Hodgson, 69, will mentor coaches across all age groups at Melbourne City in the country's A-League.
It is his first job since standing down as England manager in the wake of the Euro 2016 last-16 defeat by Iceland.
The arrangement has come about through Hodgson's friendship with City Football Group executive officer Brian Marwood.
Melbourne City are currently being managed on a caretaker basis by Michael Valkanis, following John van't Schip's departure in January.
However, Hodgson is not in consideration to become the permanent boss for next season.
Former Switzerland, Internazionale, Liverpool, Fulham and West Brom boss Hodgson had recently been linked with vacancies at Leicester and Middlesbrough.
On Wednesday, it was announced that Manchester City's owners had bought Uruguayan second division side Atletico Torque.
The City Football Group already owns MLS outfit New York City, A-League Melbourne, and Japanese J-League side Yokohama F Marinos.
Former England manager Roy Hodgson is to work with Manchester City's sister club for the rest of the Australian season on a consultancy basis.