The club made the announcement at Parkhead Stadium in Glasgow, part of which is known to fans as "Paradise".

Kenny Dalglish: "I can relate to these people"

Dalglish will also be appointed to the board of the football operations subsidiary of Celtic plc.

The former Celtic captain who is returning to the club after 22 years in England, is responsible for overseeing the management and development of Celtic's entire football operation.

His role covers selection and recruitment, youth development and support of Barnes, who is undertaking his first coaching role.

Cracking jokes for the media

Barnes will be directly and solely responsible for first team management.

Asked how he felt being back at Parkhead, he quipped: "Very comfortable. The surroundings have changed a little bit since I was here the last time.

"They must have spent my transfer fee well!".

The BBC's Andrew Cassell: "The fans have huge expectations"

Dalglish went on to talk about the tasks ahead. "It's a challenge, it's a huge club. It's a much bigger club than it was when I was here the last time.

"John, Jozef (Venglos) and myself will try our best to try to bring the supporters exactly what they want and that's a little bit more success than they had last season."

John Barnes: "A wonderful opportunity"

Barnes described Celtic as "fantastic" and he was pleased to have been given "a wonderful opportunity" to cut his coaching teeth at such a big club.

"All we can promise is that we'll try our best to make sure Celtic is successful," he added.

Dalglish had been out of the football since being unceremoniously dumped by Newcastle last August.

Former team-mate Tommy Burns, who was Dalglish's assistant for part of his time at Newcastle, said: "In putting Kenny there, they have someone that would be perceived as a football person.

Tommy Burns: "A very bold and imaginative decision"

"I had the great honour of working with him at Newcastle and the one outstanding thing that I'll always remember is his honesty and that is a fantastic quality to have.

"I'm sure he will be honest with his players and the supporters."

Since MacDonald took over the day-to-day running of the club from Fergus McCann earlier this year, Dalglish has been his number one target.

His success as a player with Celtic and Liverpool, plus title-winning stints as manager of Liverpool and Blackburn, make Dalglish the ideal man to bring trophies back to the Parkhead cabinet after a barren year following the title success of 1998.

Along with Simple Minds singer Jim Kerr, he was the public face of an unsuccessful big-money bid to wrest control of the Parkhead outfit from the Canadian multi-millionaire.

Dalglish was scathing of McCann's handling of the club, the purse strings being kept tight despite arch-rivals Rangers' growing dominance.

However, his actions tightened McCann's resolve and it is believed there was a major argument with MacDonald when the new man outlined his plans for the club.

Recruitment battle

A crisis meeting was called in Dublin last month at which MacDonald is believed to have won the battle to recruit Dalglish.

Seeking a return to glory days

Dalglish' arrival signals a new role for current team boss Jozef Venglos. After handing over the reins to Dalglish and Barnes, he will become the club's European technical director.

The quietly-spoken Slovakian has spent just one year at the club but failed to win over the fans or the players with his thoughtful, considered style.

He was forgiven by many for the abysmal start to the season which virtually handed the title to Rangers but the dreadful cup final performance which sealed the Ibrox's club's treble dream was a different matter.

More than 30 years have passed since Jock Stein led Celtic to the first European Cup victory by a British team and his mighty side of the 60s saw their nine-in-a-row championship record equalled by Rangers three seasons ago.