There were a few names linked with the Derby job, but club president and chief executive Sam Rush says Steve McClaren was the “prime candidate”.
“We enjoyed some fantastic and memorable moments under Steve during his previous tenure in charge,” he told the club website.
“Steve’s arrival and subsequent work helped transform how we played our football. Steve’s time at Derby came to a premature end and I know he regrets that greatly. He values hugely his relationship with our supporters and I know that he will work very hard to ensure that the special connection returns.
“When we sat down as a board to begin the process of appointing a new manager it was apparent, as the architect of our style of football, that Steve was a prime candidate.
“Mel Morris, our chairman, is clear about the plan for Derby County and we strongly believe that with Chris Powell, alongside Steve, we can ensure a successful future ahead.”
McClaren was dismissed at the iPro Stadium in May last year after the club failed to reach the Championship play-offs, despite spending most of the season in the top six.
His return may not sit too comfortably with some Derby fans who still blame McClaren for the team’s late failure to win promotion, saying his refusal to rule out a move to Newcastle United was a distraction.