Under Walsh, Kevin Pritchard was promoted to general manager. He replaces David Morway, who resigned Tuesday after 13 seasons with the franchise.
"I'm happy these two gentlemen will step up and take us to the next level," Bird said at a press conference at Bankers Life Fieldhouse on Wednesday.
The outgoing NBA Executive of the Year, Bird met with owner Herb Simon to finalize the restructured front office on Tuesday. Bird, 55, has had shoulder and back issues for years.
He was Pacers' head coach from 1997-2000 and came back in a front-office capacity in 2003.
"I really congratulate (Bird) for what he did with this franchise," Walsh said.
Walsh will have final say in personnel matters. He has had his own health problems and did not work last season. He'd been the head of the Knicks' front office since 2008.
Pritchard was the Pacers' director of player personnel but began doing general manager-related duties over the second half of last season.
"I think change is great," Morway said. "I really do. New ideas, new creativity, new vision and new energy."