Stephens, 37, is an experienced cycling coach despite also being regarded as one of the world’s best triathlon coaches.
He was head coach of the Australian team at London 2012 and has been involved in the last four four Olympic cycles with the junior or senior teams.
“I’m very excited about the opportunity to work as part of the Team Sky programme," he said.
“I have watched their outstanding performances with interest over the last three years and have been impressed by how they have assembled their team and introduced innovative performance strategies to cycling.
“I’m looking forward to contributing to the team and bringing in new ideas through my sport science and coaching knowledge of triathlon.
“I believe it is Dave Brailsford’s vision of introducing a diversity of skill sets into Team Sky, and ultimately the cycling staff and riders’ embracement of new training and competition strategies, that has given Team Sky a competitive advantage over other teams.
“I look forward to the challenges of understanding the intricacies of a new sport and assisting Team Sky build upon the enormous success they have already achieved.”
Stephens will leave his current roles - head coach at the Australian Institute of Sport, and programme manager at Triathlon Australia - to take the full-time coaching position with Team Sky, who won the Tour de France with Bradley Wiggins this year.
“Shaun’s appointment continues Team Sky’s commitment to assembling the very best coaching and support staff in the world, without being afraid to look beyond the arena of cycling," said Sky principal Brailsford.
“It is incredibly exciting to be bringing fresh expertise into the sport, and further reinforces this team’s desire to break new ground in the field of performance.
“The team has taken tremendous strides since the appointment of Tim Kerrison, who came from swimming, and we hope that with Shaun on board we can maintain our position as the world’s number one cycling team.”