Shannon RFC Chairman Jack Keane was buoyant about the appointment and explained the club's reasoning behind it.
"Stephen may not have been the obvious choice to everybody given he was still contracted to Leinster, but once we heard that he may have been available, we jumped at the opportunity to speak with him," explained Keane.
"The fact that Stephen is coming to Shannon as a player-coach means that we are getting the best of both worlds, and we are delighted at this exciting appointment.
"With a wealth of experience at Heineken Cup, Magners League and of course All-Ireland League level, Stephen will no doubt bring a whole new dimension to our game here in Shannon and bring us the rewards that our members demand."
He added: "Stephen's previous experience of three years with Shannon is an added bonus, and he certainly knows the standards we have, and of course expect in the club.
"We wish Stephen the very best for his new career and we will now begin to complete our management structure for next season."
Keogh's departure from Leinster comes on the back of a rewarding career in the professional game.
The 28-year-old back rower first came to notice with the Ireland Schools team, and moved up through the ranks to earn caps at Under-19, Under-21 and 'A' level.
He initially played with Munster from 2003 and earned 54 caps with his native province, before making the switch to Leinster at the end of the 2006 season where he has won a further 85 senior caps.
He had joined Shannon initially from UCC at the beginning of the 2003/04 season, and he marked his period with the club by winning three All-Ireland League Division 1 titles. His departure from the club came when he moved to Dublin.
This season, Keogh has lined out for Leinster in the Magners League and British & Irish Cup and also featured for Lansdowne in the Ulster Bank League alongside his younger brother Neilus.
Commenting on his new appointment, the Limerick man said: "I'm really excited and thrilled to going back to Shannon as player-coach.
"Coaching is something that I have been working towards in the last number of years and I am delighted that I'll be starting my new career path with one of the best clubs in Ireland.
"My time as a player with Shannon was very successful and I know only too well the standards that they set. .
"I've seen the team play on numerous occasions throughout the season, and I believe that they are a very talented group of players with plenty of youth, experience and potential.
"There's a work ethic that demands success throughout the club, and I am confident that I can maintain and build upon that ethos. I know that this will be a challenge, but it's one that I am hugely looking forward to."
In appointing Keogh, Shannon have maintained a long standing tradition by promoting former players to the head coach role.
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