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McDonald has been a part of the Indian Premier League, having played for Delhi Daredevils in the 2009 season before being signed up by Royal Challengers Bangalore in 2012 2013.
He was also the bowling coach of Royal Challengers Bangalore.
The 38-year-old former Australian all-rounder has coached Leicestershire, Victoria and the Melbourne Renegades.
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“We are delighted to appoint Andrew as our head coach. He shares our belief of discovering potential and championing dreams and is aligned with our vision to continue to drive innovation in the IPL,” said Ranjit Barthakur, Executive Chairman, Rajasthan Royals in a team statement.
The interview panel for the head coach selection process included Zubin Bharucha, head of cricket for Rajasthan Royals.
“Andrew’s innovative, forward thinking nature, along with his experience in the IPL and success in other leagues is why we have selected him as head coach to help us drive long term success, said Bharucha.
Rajasthan Royals have not won the Indian Premier League since winning the inaugural edition in 2008.