The 65-year-old has played for and managed the club during his career will take up a role helping with youth development and scouting, having ended a role as a footballing consultant to Neil Adams at Norwich City.
Royle hopes to have a big impact on moulding Everton's future stars, and is relishing the chance to have regular involvement within the Merseyside club again.
"I made my debut for Everton as a 16-year-old so I understand what it means to be a young player coming through at this football club," he told the club's official website.
"I'm looking forward to using my experience to help the players we have here."
Martinez expects the youngsters at the club to benefit greatly from Royle's years of experience in the game, and labelled the move as the first change in his overhaul of Everton's junior ranks.
"Joe's experience and football know-how will be hugely beneficial for the youngsters at a key stage of their development," the Spaniard said. "He is the first major change in our structure in player development."
As a centre-forward, Royle scored 119 goals in 275 appearances for Everton, having made his step-up from the youth team during the 1960s.
He left the club in 1974 only to return as manager in 1994 and lead them to a fifth FA Cup triumph a year later, Everton's last major honour.