Creighton announced the hiring Monday, less than an hour after Oregon introduced former Bluejays coach Dana Altman as its new coach. McDermott will be formally introduced during a news conference Tuesday.
"I'm disappointed to leave, but excited about what's ahead for me," McDermott told reporters outside his home in Ames, Iowa.
McDermott, who'll get a 10-year contract at Creighton, led Northern Iowa to the NCAA tournament three straight years before leaving for Iowa State in 2006.
Though he never had a winning season with the Cyclones, he said he has an emotional attachment to ISU.
"The thing I'm most disappointed with is that we just haven't won as many games as I'd like," McDermott said. "That will always be in the back of my mind, that I left before the job was totally finished. But you don't have control of when opportunities present themselves, and this one certainty came out of left field."
At Creighton, McDermott inherits a program that was at or near the top of the Missouri Valley Conference for most of Altman's 16-year tenure.
The last three years, though, the Bluejays have gone from being a mid-major power to just another Missouri Valley team.
The Bluejays haven't been to the NCAA tournament since 2007, and an 11-year streak of 20-win seasons ended this past season. After playing in the NIT in 2008-09, Creighton dropped to 18-16 in 2010 and accepted an invitation to the CollegeInsider.com tournament.
McDermott is scheduled to meet with Creighton's players on Tuesday, spokesman Rob Anderson said.
McDermott met with Iowa State players at his home and told them Creighton is committing to him for 10 years, graduate assistant Bryan Petersen said. No salary figure was disclosed, and Creighton athletic director Bruce Rasmussen did not return multiple phone messages from The Associated Press.
Iowa State paid McDermott $900,000 last year. He was signed at ISU through 2015. Under his contract, the Cyclones are owed $800,000 because he is leaving to coach at another Division I school.
Creighton is not required to release salary information because it is a private institution, but the most recent IRS forms filed by the school showed Altman made more than $1.1 million in 2007.
The Cyclones' LaRon Dendy said the meeting with McDermott was "like a sad movie."
"Really, it was unexpected that he was leaving, but the way he explained it to us was he's got to do it for his family," Dendy said.
Iowa State athletic director Jamie Pollard said in a statement that McDermott would be able to coach his son at Creighton.
Doug McDermott, who led Ames High to two straight state titles, last November signed a letter of intent with Northern Iowa. UNI spokesman Colin McDonough said that as of late Monday afternoon, no one from the McDermott family had asked Panthers coach Ben Jacobson to release Doug's letter of intent.
The coaching change at Creighton comes three years after a whirlwind 24 hours in which Altman resigned from Creighton, accepted the Arkansas job and then returned to Omaha after having a change of heart.
He said at the time that he wanted to finish his career at the 6,000-student Jesuit school. On Monday, Oregon said it had signed the 51-year-old Altman to a seven-year deal that will pay him a guaranteed $1.8 million per year.
The Bluejays enjoyed unprecedented popularity under Altman, who took them to the NCAA tournament seven times. From 2007-09, the Bluejays ranked among the top 15 nationally in attendance, at better than 15,000 fans a game at the Qwest Center.
McDermott, 45, is a former coach of the Bluejays' conference rival, Northern Iowa. His hiring at Iowa State was largely applauded in 2006, but he has not gotten the Cyclones moving the right direction. His four-year tenure includes a 59-68 record and the sudden departures of key contributors.
Iowa State only won 15 games this past season.
The Cyclones' Charles Boozer said McDermott told players he had struggled with the decision.
"It was definitely hard for him to say it. You could definitely tell that," Boozer said. "To coach your son is a big deal to anybody. I mean, I think for that reason I respect it."