The 52-year-old Italian recently left his post as general manager of Roma and is understood to be set to look after Spurs' scouting and transfer policy.
A statement on Tottenham's official Twitter feed read: "We are delighted to announce that Franco Baldini has joined the club in the role of technical director."
Tottenham manager Andre Villas-Boas has been keen for the club to move to a structure similar to those adopted by many in mainland Europe, having worked with a technical director during his successful time in charge at Porto.
Levy said on the club's official website, www.tottenhamhotspur.com: "Franco is extremely well respected in the industry, possessing an extensive knowledge of players around the world.
"He will strengthen our football management team, particularly in the field of recruitment, working closely with Andre Villas-Boas and Tim Sherwood across all levels on the playing side."