The 57-year-old previously spent two years at the Etihad, a period which saw us win two Premier League titles and a League Cup, as well as reach the 2021 UEFA Champions League final.
He initially joined City in the summer of 2020 from Qingdao Huanghai, having helped them win the Chinese League One title and promotion to the Super League.
Once the youngest coach in La Liga history, Lillo has managed a number of world class talents during his career, including Andres Iniesta, David Villa and Yaya Toure.
He also managed City boss Pep Guardiola towards the latter end of his playing career, during their shared time in Mexico at Dorados de Sinaloa.
Director of Football Txiki Begiristain says it is a hugely significant appointment ahead of the 2023/24 season, which gets under way on Sunday with City’s Community Shield match against Arsenal at Wembley.
“Juanma is a brilliant thinker and coach, who has a clear understanding of how the game should be played,” he said.
“His vision is totally aligned with Pep’s. They both love this game and want their teams to produce high-quality, attacking football at all times.
“He also has great knowledge of football across the world. His experiences of different leagues and styles means he brings expertise that can supplement, not just our coaching setup, but our scouting system, too.
“I have no doubt his return will bring a fresh perspective to the way we work and give everyone at the CFA a lift.”
Guardiola added: “Juanma sees things no one else in the game sees. He understands football on an incredible level, so he is the perfect person for me to work alongside.
“I have always been inspired by him – his knowledge of football, his intelligence and his humanity mark him out as a very special person in my life – and we have a shared ideology.
“He is a friend, a colleague and an inspiration. I am so, so happy he is back here at Manchester City.
“His preparation for matches is absolutely amazing. I know he will raise standards because he works so hard every single day.”
Everyone at Manchester City is delighted Juanma is back, and we wish him all the very best during his time here.