Casey began his coaching career in 1979, as an assistant coach for the University of Kentucky. In late March 1988 while still serving as an assistant coach there, Emery Worldwide employees discovered $1,000 in cash in an envelope that was accidentally opened. The envelope was addressed to Claud Mills, the father of recruit Chris Mills, and the sender was identified as Casey. The University of Kentucky said that the evidence collected during the investigation was inconclusive, and does not prove that Casey sent the money. The scandal resulted in Casey's resignation, and Casey being placed on probation for 5 years by the NCAA. The NCAA later rescinded the penalty after it was shown that Casey wasn't involved in sending the package. Casey also settled outside of court in a defamation suit against Emery Worldwide. The case was originally for $6.9 million.
After his resignation from the NCAA, Casey served as an assistant coach for the Seattle SuperSonics. During his time there, the team won 4 division titles.
At the start of the 2005–06 NBA season, Casey landed his first job as head coach for the Minnesota Timberwolves, replacing Kevin McHale. Casey's overall record with the team was 53–69, he was fired on January 23, 2007 lasting only a season and a half with the Timberwolves. At the time of his firing, the Timberwolves were 20–20, he was replaced by assistant coach Randy Wittman, who went 12–30 for the rest of the season.
In early June 2011, the Toronto Raptors decided not to pick up the option on Jay Triano's contract. Casey was named the new Raptors head coach on June 21 and would run through until the 2013–14 season.