The 56-year-old joins from Walsall, where he held the same position, and is reunited with Sean O'Driscoll who he worked alongside during successful spells at Bournemouth and Doncaster.
Head coach O'Driscoll said: "Richard is an excellent coach whose opinion I respect and has the sort of character that every football club needs.
"He will bring enthusiasm and positivity to everything he does and I'm delighted he has joined me as I know it was a tough decision to leave Walsall, where he was achieving great success on a limited budget."
City's football managing director Jon Lansdown said: "We're delighted to welcome Richard to the club as he links up with Sean again.
"They've worked together well in the past, building up clubs and achieving success at the same time."
Compensation has been agreed with Walsall for the former Hereford manager meaning O'Kelly comes in immediately to help prepare for City's home game with Ipswich this Saturday.
- Sports & Recreation