He will help fill the gap left by Alex Miller, who left his role as first team coach earlier in May to take up a managerial role in Japan.
Benitez has also lost Spanish assistant Paco Ayesteran and sorely needed support on the bench for the 2008-09 campaign.
Lee served as Sam Allardyce's deputy at Bolton for a while before replacing him as boss in April 2007, shortly before the end of the season.
But he endured a terrible start to the following campaign, with Bolton lying second from bottom of the Premier League table when he was removed from his post.
Liverpool were so close to having a great season this time around
That was not on Benitez's mind, however, as the Spaniard commented: "We have not brought Sammy back simply because he used to play for the club and used to work here as a coach.
"He is a very experienced and very well respected coach in his own right and his reputation in football made him the outstanding candidate when we knew we were looking for a new member of our coaching staff."
Lee said: "The club have made great progress over the last few years and they were so close to having a great season this time around.
"Hopefully we can keep improving and get to where we all want."
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