The Lakers have added Madsen to Coach Mike D'Antoni's staff as a player-development coach, according to a team spokesman.
"From a young age, I always kind of had coaching in the back of my mind," Madsen said in May. "I love everything about coaching."
The D-Fenders have yet to announce Madsen's replacement.
Dan D'Antoni will be the only returning assistant coach from last season. The Lakers intend to add two additional coaches to their bench alongside Mike D'Antoni.
Alvin Gentry was D'Antoni's top choice, but he is reportedly headed to the Clippers as associate head coach.