Lydiate won 72 caps for Wales and played all three Tests for the British and Irish Lions on the successful tour to Australia in 2013.
The chop-tackling blind-side flanker was a player-coach in his second spell with Dragons and remained a member of Filo Tiatia’s management team after hanging his boots up last summer.
“I have enjoyed my experience with Dragons first as a player-coach then as a full-time coach,” said Lydiate, who also played for Ospreys and Racing Metro.
“I’ve learnt a huge amount and am grateful to have been able to combine my club coaching with an interim role with Wales this season.
“It’s an incredible honour to have the opportunity to move into a full-time role with Wales.
“I’m excited not only to continue working with Steve and the group, but also take on a broader remit to help with the development of players outside of camp as well.”
Lydiate joins Danny Wilson, Matt Sherratt and former Glasgow coach Murchie as full-time members of Tandy’s staff.
He will link up with Wales after finishing the season with Dragons, where he has worked closely with experienced defence coach Dale MacLeod.
“Dan works tirelessly to improve every player he works with, no matter if they are a senior professional or a young academy prospect, as he looks to pass on his wealth of knowledge and expertise,” said Dragons head coach Filo Tiatia.
“He now has a fantastic opportunity to link-up with Wales on a full-time basis and leaves at the end of this season with our full support. Wales are lucky to have him.”
Benetton-bound Dragons coach Rhys Patchell helped Wales with kicking in the autumn and Six Nations while the Ospreys pair of Duncan Jones and Paul James took the lead with the scrum.
