The Reds were in need of a sporting director as Julian Ward announced that he will leave the Merseyside outfit at the end of the season.
Liverpool shortlisted former Wolfsburg sporting director Schmadtke for the role and the 59-year-old is now on board with the Reds on a permanent basis.
Initially he will work for the club on a short term deal, but could stay on a longer term basis.
After a disappointing campaign, Liverpool are determined to strengthen several areas of their squad in the summer transfer window.
And it has been claimed that Schmadtke has already started working on the transfer deal for Mac Allister and a potential move for Carvalho.
Liverpool have their sights set on Brighton star Mac Allister, who is tipped to leave the Seagulls in the summer.
And the Reds are also considering sending youngster Carvalho on loan in the summer for his development.