The Terriers have been in freefall since early November and their failure to win any of their last 12 npower Championship games cost manager Simon Grayson his job. Assistants Glynn Snodin and Ian Miller are also set to leave.
Grayson, who replaced Lee Clark in February last year, led the club to promotion via a penalty shoot-out win over Sheffield United in the League One play-offs but has been unable to put the brakes on the West Yorkshire club's slide to within seven points of the relegation zone.
Former Southampton boss Nigel Adkins has emerged as favourite to replace Grayson but in the meantime academy manager Lillis, 52 and professional development coach Steve Eyre have been placed in temporary charge.
"The players deserve credit for getting on with things. They've put a great shift in (on Friday morning]," Lillis, who skippered Town to promotion to the old Second Division in 1983, told the club's official website.
"We have an FA Cup fourth-round game on Saturday, which is a very important one for the club. There are no points to play for on Saturday, so perhaps the pressure is less, but it is an FA Cup tie with a view on getting into the fifth round.
"In the end it's important because it's a game of football for Huddersfield Town. I've had 14 years here now as a player and now a coach.
"When I played here I wasn't the best player but I knew that if I put a shift in the fans would get behind me and we've challenged the players to do that.
"You don't go into a cup game with the notion that it doesn't matter - we want to win. A win could kick off a run.
"The FA Cup has brilliant tradition and it's a good day for the fans to come down and for everyone to pull together."