McClaren returns to the iPro Stadium just 17 months after he was sacked from the role by current chairman Mel Morris.
He signs a contract till the end of the 2017/18 season, with caretaker manager Chris Powell becoming his assistant manager. His first game will take place on Saturday at home to Leeds United.
The Englishman, 55, succeeds Nigel Pearson following his own controversial suspension and vacating of the job within the last two weeks.
He told the official club website: “I am excited to be back at Derby County as the club’s manager.
“I have a great affiliation with the club, having been here on three previous occasions, and I am really delighted at the prospect of finishing what we started back in September 2013.
“I regret how my time at Derby ended back in 2015 and I am very motivated to put things right for the club and our supporters.
“My ultimate aspiration remains exactly what it was before, to take Derby County back to the Premier League.
It’s a decision that has already split the Rams faithful, with many fans pleased a return to the stylish, attacking football will be happening, with much of the same playing staff still at the club.
The Rams were top of the tree in March, but eventually slid all the way out of the play-offs and ended up in eighth place as a shocking run of form saw them win just three of their last fourteen games.