Xavi, 39, made a record 767 appearances for Barca and 133 for Spain in his illustrious playing career before moving to the Qatari club in 2015 ahead of his transition into coaching.
He replaces Portuguese coach Jesualdo Ferreira, who left Al Sadd after leading them to a 14th Qatar Stars League title.
Coming through Barcelona’s academy in 1998, Xavi soon became the heartbeat of the team’s midfield, winning eight La Liga titles and four Champions League crowns before joining Al Sadd.
Earlier this month Xavi, who also won the World Cup and two European Championships with his country, announced he would retire at the end of the season to pursue a career in coaching.
Al Sadd confirmed Xavi will take charge of the club’s pre-season training camp in Girona from July 14-29.