The former Ajax and Heerenveen boss has been unable to fulfill his duties for the last two weeks due to health issues, leading to speculation that he was set to the leave the AFAS Stadion.
Van Basten has instead agreed to remain with the Alkmaar club, signing a new contract as an assistant until 2016 in a role that will see him concentrate on the development of AZ's young players.
"I have found that in recent times the role of head coach was causing me increasing physical and mental discomfort," Van Basten said.
"Therefore I decided I had to be honest with myself and with AZ. I wanted to return, but not as head coach. After extensive discussions with the club and [assistants] Alex Pastoor and Dennis Haar, we have found a suitable solution for all.
"I am delighted with my new role which is a little more in the background. I want to help the young players here."
Director of football Earnest Stewart revealed that the club are in talks with Pastoor about taking Van Basten's old position, but stressed that a deal is yet to be completed.
"The role of Alex as head coach is a logical consequence of recent developments," Stewart said.
"We are in conversation with him. However, we have not yet come to a final agreement."