"Mo will continue to be responsible for all aspects of soccer operations and we are providing him with more resources to support his objectives," said Tom Anselmi of club owners Maple Leaf Sports & Entertainment.
"John Carver has been added to serve as head coach of Toronto FC, which will enable Mo to devote more time to manage the assessment and procurement of talent which is even more important now with the expanded international player mix available for MLS teams."
Johnston guided Toronto through their first season in MLS in 2007, but his team finished with the worst record in the league of six wins, nine draws and 15 defeats.
The team set two unwanted records, needing 558 minutes of action to score their first goal of the season, and later going 824 minutes without a goal.
Carver arrives in Canada three weeks after leaving financially-stricken League One club Luton in England.
There, Carver worked alongside Kevin Blackwell, but was sacked after joining his boss in serving notice of his resignation due to the problems at the club.
This will be Carver's first spell as a head coach in his own right.
"I am delighted to have John Carver alongside me as we start to prepare for the 2008 season," said Johnston.
"He brings a lot of experience with him in all aspects of the game and I'm looking forward to working together. We are committed to making this team better in every way, and John will be a big part of that."
Carver, 43, began his coaching career with home town club Newcastle, stepping in as caretaker manager after Sir Bobby Robson was sacked in 2004.
He then moved to Leeds to work with Blackwell, turning down the chance to be a manager himself when Carlisle offered him a job. He would also manage Leeds in a caretaker role before following Blackwell to Luton.