The 34-year-old former Torquay United and Weston-super-Mare defender was forced to retire from playing for the Peacocks earlier this year following persistent injury problems.
With goalkeeping coach Paul Edwards unable to continue in his role this season, an opportunity arose for Villis to put his vast experience to good use.
Villis will join the existing management team of boss Leigh Robinson, assistant-manager Michael Meaker and coach Rob Dray, who will all continue in their roles.
Villis told www.tauntontown.com: "It was fantastic to be asked by Leigh to join the coaching team for the new season. I had some fantastic moments as a player so it's a real privilege to stay at a club that is going from strength to strength.
Robinson added: "Matt has been a big part of the club and dressing room for the last few years before retiring and he'll bring a wealth of experience to the team.
"Matt's got huge experience from the professional game, played very successfully at almost every non-League level and we really like the way he thinks about the game.
"He'll have quite a varied job taking over from Paul who unfortunately has to take a step back this year due to work, but we're delighted to have Matt on board”.