Fox will step down from the role after the Steinlager Series next year, having been a selector for a decade.
Schmidt will take up his position with the All Blacks and assist in selecting the squad for the Rugby Championship after finishing his part-time duties working with the Blues in the Super Rugby Pacific competition.
New Zealand coach Ian Foster said Schmidt is a shrewd appointment.
"Joe will bring a wealth of New Zealand and international experience into the role, so we are delighted to have him join us," Foster said. "He will work closely with me and ‘Plums’ [ fellow selector John Plumtree] on selections but his insights will be valuable in other areas as well, so we look forward to having him join us."
The experienced Schmidt said: "It's humbling to be involved and I'm looking forward to learning more about the players and the All Blacks environment and helping out as best I can."