Groves was a coach at Portsmouth when they were in the Premier League and when they lifted the FA Cup under Harry Redknapp.
The 48-year-old takes up the first team coach role left vacant by Guy Whittingham, who left the club at the end of April when his contract was not renewed.
Reds boss John Gregory said: “I’m delighted that Paul has agreed to join us.
“He’ll be a valuable member of the backroom team and is someone who is very experienced.
“I’m looking forward to working alongside him for the coming season.”
Groves, 48, a former midfielder and then defender, made more than 600 appearances playing for a number of clubs including Leicester City, Blackpool, Grimsby Town and West Bromwich Albion in a playing career that spanned almost 20 years.
Groves became player/manager at Grimsby before then moving to Pompey as a coach, briefly becoming caretaker manager before Avram Grant was appointment.
He coached at West Ham before becoming youth team manager at Bournemouth. He became permanent manager of the Cherries before Eddie Howe returned to the club, and after again managing the youth team he left the club in January of this year.