The 42-year-old, who was linked with Wolves, joins Nigel Pearson's backroom staff having been Leicester City's lead youth development coach since 2013.
"I felt it was time for a change and I now have this great opportunity because of Nigel," he told the club website.
"I have missed Derby County. I always said this is my club and I have that feeling that I am back at home."
Former Derby County midfielder Inigo Idiakez has rejoined the Championship club as first-team coach.