AFL chief executive officer Andrew Demetriou, who made the announcement in Sydney on Wednesday, said Harley is playing a key role in the area.
"Tom is an outstanding leader of people and is playing a vital role in developing and marketing the game in Sydney, New South Wales and the ACT," Demetriou said.
"This is a very important role for the AFL and we are very pleased to have someone of Tom's character and experience in such a vital market."
Harley has been working with the AFL as planning & operations manager in NSW/ACT, which includes overseeing 70 staff and $15 million in development investment.
Over the past two years he has also contributed as an assistant coach with the AIS-AFL Academy and worked on projects during the bid phase of the GWS Giants.
Harley will continue to report to the AFL's general manager of development David Matthews, who is also based in Sydney.
"I'm extremely honoured and excited by my new appointment," Harley said.
"New South Wales, and Sydney in particular, has been my home since retiring from playing and I feel I have developed an intimate understanding of the opportunities for the AFL in the region.
"I relish the chance to lead a group of passionate people in our quest to continue to drive future game development in New South Wales and the ACT.
"The past five years have seen our participation numbers grow by 110 per cent to in excess of 125,000 and we aim to replicate this growth in the next five years. It is a hugely exciting time to be involved in Australian football in the northern states."
Harley had an outstanding playing career at elite level, captaining the Cats to premierships in 2007 and 2009 and was vice-captain of the All Australian team in 2008.
He holds a Bachelor of Commerce degree, served on the AFLPA board from 2005-2009 and is an accomplished broadcaster with the Seven Network.
"His experience is invaluable as the AFL continues to build the base for our game across New South Wales and the ACT," Matthews said.
"Tom's focus will be on further developing partnerships with the Sydney Swans and GWS Giants; identifying and attracting talented players; building participation through schools, community clubs and NAB AFL Auskick; and developing our corporate and government profile.
"Tom's achievements as a footballer are well known but his character was pivotal in this appointment as one of the AFL's most respected players, setting a positive example both on and off the field."
