The deal was announced in a statement released by the club on Wednesday.
The 40-year-old will take over from Jimmy Berisha, the interim sports director who will now return to the position of managing director.
The first course of action for Olofinjana will be the appointment of a new head coach.
“Seyi Olofinjana will take over the position of Technical Director at the Grasshopper Club Zurich with immediate effect and will be responsible for sports,” the statement on the club’s website read.
“He is taking over the position of interim sports director from Jimmy Berisha, who is stepping back into his role as managing director.
“Seyi Olofinjana will arrive in Zurich in the next few days. The first thing that will be dealt with is the appointment of a new head coach.”
On his part, the former Wolverhampton Wanderers player expressed his excitement about the move.
“I’m delighted to be part of a historic club like GC. I hope we can re-establish GC at the top of the Super League together,” he was quoted as saying.
Olofinjana represented Nigeria 48 times between 2002 and 2011.
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