The Orlando Sentinel said legal representatives for the Magic and Donovan met Tuesday to work on voiding the contract he agreed to Friday. Donovan is expected to be prohibited from working in the NBA for five years in return for the release.
Donovan had second thoughts about leaving Florida for the NBA and spent the weekend trying to get out of his contract.
Donovan compiled a 261-103 mark over 11 seasons at Florida, leading the Gators to the national championship the past two years and a championship game appearance in 2000.
Earlier this off-season, he turned down an offer to become the head coach at the University of Kentucky.
In Orlando, Donovan would have replaced Brian Hill, who was fired May 23 after two consecutive losing seasons.