It is the 55-year-old's first role since leaving Newcastle United in March and he has signed a contract which will run until the end of next season.
Former England boss McClaren was named as the Magpies' head coach in June 2015 but won only seven of his 31 games in charge in all competitions.
He had previously managed Derby between 2013 and 2015 and played for the Rams in the mid-1980s.
Derby parted company with ex-Newcastle coach Nigel Pearson earlier this month.McClaren told the official Derby website: "I am excited to be back at Derby County as the club's manager.
"I have a great affiliation with the club and I am really delighted at the prospect of finishing what we started back in September 2013."