The 39-year-old retired from football in 2015 but has continued to work in the game in an ambassadorial role.
Diouf will now link-up with Guediawaye with the aim of helping the Dakar-based side gain promotion to the Senegal Premier League.
"We have new mechanisms in place to move forward, with a management team, a college for the management of the club," club communication chief Malick Sy told Lesolei.sn.
"In the college, the novelty is the creation of a position of Sports Director for which we negotiated and obtained the appointment of El Hadj Ousseynou Diouf."
The former Liverpool forward was never far from controversy during his Premier League career
Sy also said the club are eyeing a place in a continental competition in three years' time, with a five-year target of having a full training centre.
As well as playing for Liverpool, Diouf spent time at Blackburn, Bolton, Leeds United, Sunderland, Doncaster and Rangers. He also had spells in France and finished his career with Malaysian side Sabah FC.