Following his retirement in 1997, Tassotti took up a coaching position in Milan's youth system, winning the Torneo di Viareggio with the AC Milan Primavera side in 1999 and 2001. In 2001, following the sacking of manager Alberto Zaccheroni, he served as a caretaker manager for the senior club and coached Milan for the remainder of the 2000–01 Serie A season, alongside Cesare Maldini, helping the club to qualify for the UEFA Cup, before being replaced by Fatih Terim at the end of the season. In the 2001–02 season, Tassotti joined Milan's coaching staff under former teammate Carlo Ancelotti as an assistant manager, and retained his post after the latter's departure, under Leonardo, Massimiliano Allegri, Clarence Seedorf and Filippo Inzaghi. In January 2014, he acted as caretaker manager for one match, a 3–1 home win over Spezia for the campaign's Coppa Italia following Massimiliano Allegri's dismissal and before Clarence Seedorf's appointment. In July 2015, he began working as a talent scout for Milan.