The 41-year-old takes up the new job after leaving the coaching staff of Danish outfit Nordsjaelland last month.
“We have a lot of talented players in our squad who have come from the academy and made their first steps as professional footballers with us," Monchengladbach director of sport Max Eberl said, according to the club's official website.
"Ensuring that players like Laszlo Benes, Djibril Sow, Mamadou Doucoure, Ba-Muaka Simakala and Will Ndenge develop is important for Borussia Monchengladbach.
“We want to have a coach for these players; he will exclusively look after them.
"The man for the job is Otto Addo, and we’re pleased to have been able to bring him to Borussia.”
After hanging up his boots, Addo started his coaching career at Hamburg in 2013, supervising the U-19 team as the assistant manager.
Later that year, he had the opportunity to work as caretaker coach of the senior team following the sacking of head coach Thorsten Fink.
The German-born, who played for Ghana at the 2006 World Cup, has also worked as a scout for the Black Stars since retiring from active football.