The vacancy with Victoria opened up after David Saker was named Australia's new assistant coach in July, and McDonald soon became the leading candidate. He was appointed head coach of the Melbourne Renegades - a position that Saker had also held - earlier this month and Cricket Victoria has now confirmed that McDonald will also take the state reins.
The move continues a rapid coaching rise for McDonald, 35, who less than two years ago was still playing in the Sheffield Shield. Although he ended his career with South Australia and also played four Tests during 2009, most of McDonald's career in Australia was played with Victoria - he appeared in 71 first-class games for them for 3516 runs at 40.88 and 163 wickets at 28.18.
Over the past two years, McDonald has been a popular coach of Leicestershire, lifting the performances of the struggling county, and now he will take over a side sitting in a position of strength in Australian cricket. Victoria have won the past two Sheffield Shield titles, first under long-time coach Greg Shipperd in 2014-15, and then under his replacement Saker in 2015-16.
"I'm really pleased to be coming home to Victoria to take on the coaching role with the Commonwealth Bank Bushrangers," McDonald said. "The state team is in a really good place on the back of consecutive Shield victories and I'm looking forward to building on that culture of success and delivering results across all formats.
"I'm a proud Victorian and have been lucky enough to share some big wins playing cricket for this state. I'm excited about the challenges that are ahead of us and I look forward to working with the coaching staff and the players led by Matthew Wade on the busy schedule ahead."
Tony Dodemaide, the Cricket Victoria CEO, said: "We're delighted that Andrew has agreed to return to Victoria after his time in charge with Leicestershire. He brings a great enthusiasm and knowledge to the role and knows Victorian cricket well which stands us in good stead ahead of the upcoming Sheffield Shield season and Matador BBQs One Day Cup.
"The Commonwealth Bank Bushrangers have enjoyed terrific success in the last two years with our consecutive Shield victories. Andrew - a former Shield winner himself - understands elite performance environments and is looking to build on that success this season."