Djokovic hired Agassi in May to work with him at the grand slams but has been without a touring coach since splitting from long-time mentor Marian Vajda the same month.
Czech Stepanek, 39, called time on his playing career in November after struggling to recover following back surgery.
He reached a career high of number eight in the world in singles in 2006 and won two grand slam doubles titles and two Davis Cups.
The pair announced the new arrangement in a live post on Instagram, where they pretended to talk about the possibility of Stepanek coaching Djokovic before the Serb opened a door to reveal the new member of his team.
Djokovic said: "This is the new team, this is my new man. We are excited for the new season."
Djokovic and Stepanek will begin work together in Monte Carlo, where the former world number one lives, in the coming days as he prepares to make his comeback from an elbow injury.
"Radek is one of my very close friends on the tour and I was always impressed with his level of determination, passion and love for the sport," said Djokovic on novakdjokovic.com.
"He has a lot of experience and knowledge, and he has played on a high level for many years. I am excited to join our forces together and cannot wait to compete again having a new team to back me up
"On Andre's suggestion I pursued Radek, therefore I am sure the two of them will work well together. The new season is about to start and there is a long way to go back to where I left off.
"We are aware that I need to go step by step, not hurrying anything. I feel much better now, and I can't wait to play matches again."
Although Stepanek's playing career does not compare to Djokovic or Agassi's, the Czech is considered to have one of the sharper tennis brains around.
A quirky character with a game to match, he also stood out on the court for his individual fashion sense.
Stepanek said: "I'm honoured to be a new member of Novak's team. It is a new and exciting challenge for me, which I'm looking forward to and I believe that as a team we can help Nole to reach his goals."
Stepanek's first task will be to help Djokovic work his way back to full match sharpness.
The 30-year-old has not played a match since Wimbledon, after which he announced he would be taking the rest of the season off to allow an elbow problem that had dogged him for months to heal.
Djokovic is due to return to action in Doha at the QatarExxonMobil Open, which begins on January 2.