He started his coaching career in 1984 at the age of 26 with Bagnone, an amateur Seconda Categoria team which he led to immediate promotion in his debut year. In 1988 he became assistant coach of Massese. In 1989 he was appointed at the helm of Promozione team Forte dei Marmi, side he led to promotion in 1991. After a single season with Viareggio, he obtained a professional coaching license and returned to Massese, this time as head coach, in 1992. After four Serie C1 seasons with Siena (1993-1995) and Carrarese (1995-1997), he was chosen to fill the Chievo Verona head coaching position, and led the gialloblu to a final seventh place in the Serie B. He moved to Brescia in 1998, and Empoli one year later. In 2002, Empoli ended in fourth place, being therefore promoted to Serie A. On his Serie A debut year, Baldini led Empoli to a good 12th place. In 2003 he became Palermo boss, with the goal to guide the rosanero to immediate promotion to Serie A; however, he was fired on January 2004 following a 1-3 home defeat to Salernitana. He returned to coach in the 2004-05 season with Parma, being appointed at Renzo Ulivieri's place on September and sacked on December 2004, leaving his side at the second-last place in the Serie A table. On September 2005, he was appointed as Lecce head coach, but was again fired on January 2006. On June 2007 he was announced as new Catania head coach.
On 26 August 2007, during the first league match, Baldini kicked the behind of Parma boss Domenico Di Carlo after being sent off and having engaged in a dispute with his opponent head coach. He consequently received a one-month ban due to his unprofessional behaviour. During his ban period, assistant coach Gianluca Atzori served at his place during games.
After a hard-fought match against Inter (nevertheless losing 2–0), Baldini decided to switch from his traditional 4-2-3-1 to a more practical 4-3-3 to better suit Catania's needs. In his first two successive matches since Inter, Catania played an honorable match against Fiorentina, despite losing 0–1 to the viola. In the next match, Catania achieved its first league victory, defeating relegation rival Empoli 1–0 thanks to a goal from Martinez. On September 30 his Catania side held Milan to an impressive 1–1 draw at the San Siro. He will return to the Catania bench against Livorno.
Despite criticism, Baldini initially managed to achieve a better league position than his predecessor Pasquale Marino, and also led his side to a historical qualification in the Coppa Italia 2007–08 semi-finals. However, a row of poor results quickly pushed Catania down to 18th place, being potentially relegated as of Week 31, and with only three points ahead of last-placed Empoli, persuading Baldini to resign from his post on 31 March 2008.
In July 2008 he accepted to return at Empoli, accepting the managerial role for the freshly relegated Tuscan side in their Serie B 2008–09 campaign. He was however dismissed from his coaching post after failing to guide Empoli back to the top flight, following an unimpressive fifth place in the regular season and a successive defeat to Baldini's former club Brescia in the promotion playoff semi-finals.
After his farewell to Empoli, he left active football and worked as a pundit for sports channel Sportitalia.
On 13 June 2011 he was officially announced as new head coach of Serie B club Vicenza, signing a one-year contract with the Venetian club, but on October 4, 2011 he was sacked. and replaced by Gigi Cagni.