The former Canberra head coach and long-time assistant returns to Redfern, where he worked in 2017 and 2018 under Michael Maguire and Anthony Seibold.
The Rabbitohs lost experienced assistants Sam Burgess and John Morris late last year, with the stacked side going through a tumultuous period in which they've won just five of their past 19 games.
Demetriou said Furner would look after the team's defence, which is currently ranked the worst in the competition, conceding nearly 33 points per game.
"I'm really happy to have David joining our crew. He will add a lot to our coaching staff and, most importantly, our players," Demetriou said.
"We're looking for ways to improve our performances and we think that having an experienced coach like him coming in to concentrate on the team's defence will be a positive.
"We've worked together previously and had great success at the Cowboys, and he knows what our club is all about having worked here before."
David Furner (R) arrives at Souths training in 2018 alongside former coach Anthony Seibold (L). (Joel Carrett/AAP PHOTOS)
The pressure looked to be getting to Demetriou last week when he walked out of his pre-game press conference after just 27 seconds.
But his side put on an improved performance in their 34-22 loss to Cronulla, pushing the Sharks to their limits despite a series of key injuries.
Speaking before Furner's signing was confirmed, Rabbitohs hooker Damien Cook backed in the decision and praised Demetriou for how he was handling himself through the intense speculation.
"That's going to be a great little addition as well to our team and to help us out at the moment," Cook told Sky Sports Radio.
"There was so much noise around last week ... the way 'JD' has handled himself has been great too, you wouldn't think anything of it.
"It's great to see the noise has dropped off and the media has dropped off a bit and we can just focus on what we need to do because we know we've got the team here to get the job done."
But Cook, who Demetriou controversially dropped in favour of rookie hooker Peter Mamouzelos for the Sharks clash, said he hadn't yet spoken with the coach about his future in the side.
The Bunnies have a bye this weekend before playing Melbourne on Anzac Day.
"With the longer turnaround before our game, there was no need to talk footy the last couple of days," Cook said.
"We're just enjoying those couple of days off before we ramp it back up again, so I'll probably have a chat to him (on Wednesday), get out there and train well and see where we're at."
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