O'Brien, who replaced Carlisle as the Pacers' coach in the summer of 2007, emerged last week as Dallas' top candidate to replace Terry Stotts, who was hired away by the Portland Trail Blazers as their new head coach.
When Stotts left, after Dwane Casey was hired by the Toronto Raptors as their new coach in the 2011 offseason, Carlise was determined to hire an assistant with head-coaching experience.
Sources said that O'Brien received a multiyear deal, with Carlisle about to enter the first season of a new four-year extension.
O'Brien was fired by the Pacers halfway through the 2010-11 campaign after three non-playoff seasons in Indy. He previously coached the Boston Celtics (reaching the Eastern Conference finals in 2002) and the Philadelphia 76ers (for one season in 2004-05).