The contract is for six years, sources told ESPN's Adrian Wojnarowski, as Woodson returns to his alma mater.
"I've never coached in college, but I like to think I've coached at the highest level and I've coached some of the greatest that ever graced the basketball court," Woodson said Monday during a video call. "Yes, there are going to be some challenges for me. But at the end of the day, coaching is coaching and I've got to get players, recruit quality student-athletes and get players who can come in here and help this program move in the right direction."
Woodson, 63, is an Indianapolis native who played for the Hoosiers and coach Bob Knight from 1976 to 1980. Woodson has spent his entire coaching career in the NBA, with 25 years of experience as an assistant and a head coach. He was the head coach of the Atlanta Hawks for six seasons and the Knicks for three.
"I have spoken with numerous individuals at the college and NBA levels, and they were unanimous in their support of and respect for Mike," Indiana athletic director Scott Dolson said Sunday. "From his ability in terms of X's and O's to his skill at building relationships and developing players, his reputation is outstanding. As a coach, he's succeeded at the highest levels of the NBA, and he's mentored some of the game's all-time great players."
Woodson becomes the first Indiana alum hired as head coach since Lou Watson replaced Branch McCracken in 1965. Dan Dakich, who also played for Knight and is now a radio personality and color commentator on ESPN, was interim head coach at Indiana for seven games in 2008 after Kelvin Sampson was fired.
"We know it is a very special opportunity for Mike to return to his alma mater as head coach and wish him the very best," Knicks president Leon Rose said in a statement posted on Twitter. "Woody had a great impact on our team's play and culture this season and he will be missed."
Woodson is the second Black coach and third minority coach to lead the program, after Mike Davis, Knight's successor, and Sampson, who is Native American. Woodson becomes one of 14 Black coaches in the Power 5 and Big East conferences, a group that includes other NBA stalwarts in Juwan Howard (Michigan) and Patrick Ewing (Georgetown).
Woodson met with the team Sunday night and was scheduled to meet with players individually Monday.
"We have a few players who have entered the portal, players I think can help us win basketball games next season,'" Woodson said. "My first job is to sit down with each and every one of them about staying in Hoosier Nation. If I have to beg and plead a little bit then to keep them here then I'm going to do that."
Still, Woodson knows what he wants Indiana basketball to look like and how he wants to rebuild this blue-blood program that hasn't made an NCAA tournament appearance since 2016 and hasn't won a national championship since 1987.
"It's going to be my job to bridge the gap between young people who don't know who Coach Woodson is and the old-timers. I'm going to bring back all the old-timers just like the old days and we're going to bridge the gap between old and new," Woodson said. "The players are looking for me to get them where they need to go, and I'm looking for them to get Indiana basketball where it needs to go."
Woodson has talked with Hall of Famer Larry Brown about a possible role on the IU coaching staff, sources told Wojnarowski. The thought for Brown's role would be an on-campus, non-recruiting slot, Wojnarowski reports. Woodson was an assistant under Brown with Sixers and Pistons. Brown, 80, left SMU in 2016.
Reaction to the hiring was positive from those closest to the program.
"I love it. Woody is a proven coach," former Indiana and Knicks star Jared Jeffries said. "He did an amazing job with our Knicks team. One of the nicest guys I've ever met. Most of all, understands our school better than anyone."
Indiana fired Archie Miller this month after four seasons in Bloomington. The Hoosiers pursued Boston Celtics head coach Brad Stevens and Ohio State head coach Chris Holtmann, but both remained in their current jobs.
Woodson, who still ranks fifth all time at Indiana with 2,061 points, was one of dozens of players who attended Knight's return to Assembly Hall in February 2020.
The Associated Press contributed to this report.