O'Neil has been appointed the club's Under 23s assistant coach.
He hung up his football boots last summer after a one-season stint with Bolton and he will now help out newly-appointed boss Barry Lewtas, who was promoted from his role with the Under 18s.
O'Neil, 37, told Liverpool's official website: "It's been going on for a little while and obviously with the break and the Academy having to take an even longer break than the first team, I've had to wait a little while, but now it's finally come around and I'm really excited and can't wait to get going."
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