NFL.com on Monday first reported McDaniels and the Colts had reached agreement for the New England offensive coordinator to take over for Chuck Pagano, who coached the Colts to a 56-46 overall record (including a 3-3 postseason mark) since joining the team in 2012.
Houston Texans defensive coordinator Mike Vrabel, Kansas City special teams coach Dave Toub and Carolina Panthers defensive coordinator Steve Wilks, reportedly were on the Colts short list of candidates.
Another potential candidate, Kansas City offensive coordinator Matt Nagy accepted the head coaching job with the Chicago Bears on Jan 8.
McDaniels, 41, is in his 14th overall season with the Patriots. He was fired during his second season as head coach with the Denver Broncos, with whom he posted an 11-17 mark during the 2009-10 seasons.
The Colts can't officially offer the job or hire McDaniels until the Patriots season comes to an end. New England plays host to the Jacksonville Jaguars in the AFC Championship Game at 3:05 p.m. ET on Sunday.