From 2000 to 2002 he was non-playing coach of the Box Hill Hawks in the VFL, and coached the club to a premiership victory in 2001, defeating his former club Werribee in the grand final.
In 2004, McDonald took over from Peter Schwab when he was sacked from the Hawthorn Football Club coaching job late in the season following a dismal season. He was promoted from assistant coach to caretaker, with four matches left to go. Hawthorn won two of them. but was not retained for the 2005 season, instead, Alistair Clarkson took over the top job. McDonald became assistant coach at his old club, North Melbourne Kangaroos, for the 2005 season.