The hiring ends a chaotic two weeks in which Orlando fired Brian Hill, hired Donovan and then had to find another replacement because he got cold feet and returned to the Florida Gators.

Van Gundy coached the Miami Heat for more than two seasons, resigning last year but remaining with the team as an adviser to coach Pat Riley. He also was being courted by the Sacramento Kings.

The Magic did not disclose terms of the agreement, but planned a news conference later in the day.

"Stan enjoyed tremendous success during his tenure with the Heat," general manager Otis Smith said in a statement on the Magic's Web site. "He has a great basketball mind, tremendous respect around the league and will get the most out of our players. Stan was sought after by many teams this summer and we feel very proud to welcome him to the Magic family."

Van Gundy was under contract with the Heat for another year, and the Magic had to give Miami undisclosed compensation.

Van Gundy did not immediately return a message left at his home today. It was not clear if he was in town; the Kings confirmed Van Gundy was in California yesterday for further talks.

Donovan stunned the Magic by changing his mind within a day of his introduction June 1, deciding he couldn't leave the Gators after two straight national championships. Donovan contacted the Magic on Saturday to say he wanted out of his 5-year, $27.5 million deal. The Magic tried all weekend to get him to stay, but finally announced late Wednesday he was let out of the contract.

"I realized that, in my heart, I belonged in college basketball," Donovan said in a statement. "As soon as I realized that, I contacted the Magic immediately to let them know."

The Magic said they had a "legal right to hold Billy to the contract he signed," but let him go because he changed his mind.

The Magic's Van Gundy announcement came hours before Donovan was to speak at a Gainesville reinstatement.

From the beginning, Van Gundy was Orlando's No. 2 choice. He was also considered by the Charlotte Bobcats and Indiana Pacers, but those teams hired other coaches.

Van Gundy was Riley's longtime protege before taking over as Heat coach shortly before the start of the 2003-04 season, Dwyane Wade's first with the Heat. That team got off to an 0-7 start, but wound up 42-40 and with a No. 4 seed in the Eastern Conference playoffs. Wade, the MVP of last season's NBA finals, still credits Van Gundy for turning that season around.

Now, they will be going against each other four times a season, with Miami and Orlando both in the Southeast Division.

"It'll be exciting to go against a coach that I feel really helped me develop to this point and, as always, there's that mutual respect," Wade said this week as speculation loomed that Van Gundy was Orlando-bound. "So best of luck to Stan and his family and hopefully he gets what he wants and what he deserves."

Van Gundy's brother Jeff has spent parts of 11 seasons as coach of the New York Knicks and Houston. Last month, Jeff was fired as coach of the Rockets. Their father, Bill, was a successful college coach in upstate New York.

"Stan's a guy who knows the game. You can see that from his whole family line, from his father to his brother to himself," Wade said. "I know it's something he loves to do. So for him to be back ... it's great."

Donovan and Jeff Van Gundy are close friends because the Florida coach played under him in college at Providence. The two even conferred as Donovan wrestled over the Magic decision.