Full-back Murphy, 35, announced his playing retirement at the end of the current campaign. He won 72 caps for Ireland, played in two British and Irish Lions Tests and made his 322nd Leicester appearance in last weekend's Premiership clash against London Irish.
Cockerill said: "Although he has announced the end of his playing career this summer, he will be joining the coaching team here next season and we look forward to his continued involvement."
Tigers will now face Harlequins in the Premiership play-offs at Welford Road next Saturday. Murphy, who has been troubled by a knee injury for much of this season, looks set to take up a skills-based role when he starts work as a coach.
"Geordan is an all-time great at this club," Cockerill said. "He has been a major player for us for so long and has had a massive impact on the team in his time here.
"He has played at the very top level of the game for a long time and has been one of the most outstanding players in the history of Premiership rugby."
Murphy made his Leicester debut in 1997 and went to score 691 points, including 93 tries. He has collected seven league titles and two European crowns.
"Every player wants to play on forever but, unfortunately, your body just doesn't let you do that," Murphy said. "It is with a very heavy heart that I have had to accept defeat and announce that I will retire from playing this season.
"I have been very lucky with Leicester to win a fair amount of silverware, and I am looking forward to looking back on that at some stage - it still hasn't really sunk in. I have a lot of good memories that I will be able to look back on with great affection.
"The best part of playing is the players, the mates that I have made through rugby. I'm very lucky that some of my best friends in life are guys that I have met through rugby and played with and played against. Welford Road is a very special place. It is very dear to my heart, as are the supporters."
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