The 43-year-old spent the past two seasons as the Capitals' associate goaltending coach; that position will be filled by Scott Murray.
"Olie has a wealth of knowledge and experience and we believe with him spending the past two seasons as the associate goaltending coach he is ready to take the next step in his coaching career," general manager George McPhee said. "We are also very pleased to welcome Scott Murray to the organization."
Kolzig, taken by the Capitals with the 19th pick in the 1989 NHL Draft, played 711 games for them. He owns nearly every Capitals goaltending record, including games played, wins (301), shutouts (35) and minutes (41,259), and ranks fourth in goals-against average (2.70) and third in save percentage (.906).
In terms of single-season records, Kolzig leads in games (73), minutes (4,371) and wins (41), and is second in GAA (2.20), save percentage (.920) and shutouts (six).
Kolzig helped Washington to the Stanley Cup Final in 1998. He was awarded the 2000 Vezina Trophy, awarded to the NHL's top goalie, and was named the 2005-06 King Clancy Memorial Trophy winner, awarded to the player who best exemplifies leadership qualities on and off the ice and who has made a significant humanitarian contribution to his community. He was named to two NHL All-Star teams (1998, 2000).
Murray joins the Capitals organization after spending the past five seasons as goaltending coach for the Sudbury Wolves of the Ontario Hockey League. He spent the past two years working with goaltenders at RHP Training Facility, a year-long goaltending development program in Sudbury which he co-owns.
Murray, 35, played hockey at Lake Superior State University. The St. Clements, Ontario, native played for the San Angelo Saints (Central Hockey League) and Motor City Mechanics (United Hockey League) during his professional career.