Add the coconut pudding mix and milk to a large bowl. Whisk until combined and then continue to mix until it starts to thicken, about 2 minutes.
Fold in half of the whipped topping. Once it's mixed into the pudding, set aside.
Place 1/4 of the graham crackers into the bottom of a 9-inch x 13-inch baking dish in a single layer. You may need to break some of the graham crackers to make them fit.
Add 1/3 of the pudding mixture on top of the graham crackers and spread into an even layer. Repeat 2 more times layering the graham crackers and then the pudding. Add the last layer of the graham crackers on top. (You may have a couple of small pieces left over, that’s okay.)
Smooth the remaining whipped topping over the cake so none of the graham crackers are exposed. Cover with plastic wrap and place in the fridge for at least 6 hours. (Overnight is best though.)
When you're ready to eat, sprinkle the top of the cake with toasted coconut. Cut into 15 slices and serve chilled.
Notes
To toast the coconut:Place a skillet over medium-low heat. Add the shredded coconut and cook until it starts to turn golden brown, stirring occasionally. Transfer to a bowl to cool.
Store in the fridge for up to 4 days covered with plastic wrap. This icebox cake freezes well for up to 3 months. It's also delicious when served slightly frozen.