The 43-year-old, who last managed in the Scottish Premier League with Hibernian, joins the Bramall Lane outfit with immediate effect.
The Yorkshireman, based in his hometown of Barnsley, has been out of the game since being dismissed by the Easter Road outfit last November.
On the appointment of Heckingbottom, Blades academy manager Jack Lester said: "Paul is a fantastic coach and a great appointment for the club.
"He brings a wealth of experience to the Academy and we are delighted to have secured his services.
"We have some excellent prospects coming through in the next few years and it is vital we have top coaches, like Paul, and Derek Geary, who remains lead coach for the under-18s, to develop them."
Heckingbottom famously led Barnsley to a Wembley double at the final third of the 2015-16 season when the Reds won the Johnstone's Paint Trophy and secured promotion in the League One play-offs - beating Oxford United and Millwall respectively.
Barnsley consolidated in the second tier in the following season with Heckingbottom leaving Oakwell in early 2018 ahead of a short spell at Elland Road when he was named as Thomas Christiansen's successor.
He left Leeds in the summer of 2018.