Upon arriving at Derby in January, the 33-year-old will sign an initial 18-month contract.
"While the decision to move home was a tough one, family is everything to us and we make this change to be closer to the ones we love back in England," Rooney said in a statement. "The opportunity to go back home and start the next step of my career in coaching was the factor that made my mind up."
Rooney, who joined MLS in July 2018, had a contract with D.C. until 2021.
Reports suggested his wife, Coleen, had grown homesick and returned to England with their children.
Derby then offered his family a chance to be together - and Rooney an opportunity to expedite his transition to management.
Along with helping the club's push for promotion, Derby County executive Mel Morris said Rooney will assist with the development of academy players.
"To have Wayne Rooney as a player, and equally as an aspiring coach, is incredible and I can only imagine the buzz this will generate amongst our supporters at home and internationally," Morris added.
Rooney spent the majority of his distinguished career at Manchester United, where he scored a club-record 253 goals in 559 appearances.
He left the Red Devils in 2017 and spent a year with boyhood club Everton before heading overseas.