The Pacers officially named Bjorkgren as their new coach Tuesday but didn't disclose terms of the deal.
"We are very pleased and excited to have Nate as our new coach," Pacers president of basketball operations Kevin Pritchard said in a statement. "This was an extensive and thorough search, and when we reached the conclusion, we felt strongly Nate is the right coach for us at the right time.
"He comes from a winning background, has experienced championship success, is innovative and his communication skills along with his positivity are tremendous. We all look forward to a long, successful partnership in helping the Pacers move forward."
Bjorkgren worked with current Raptors head coach Nick Nurse at two stops in the G League, winning a title with him in Iowa in 2011. Bjorkgren also reached the G League Finals as head coach of Santa Cruz in 2013 before jumping to the NBA in 2015 as an assistant with the Phoenix Suns.
The 45-year-old Bjorkgren reunited with Nurse in Toronto in 2018 and was part of his staff during the Raptors' championship-winning season in 2019.
"I am honored to take on the role as head coach of the Indiana Pacers," Bjorkgren said in a statement Tuesday. "This is something I have prepared for during my career. I want to thank Kevin, Chad [Buchanan], Kelly [Krauskopf], Larry Bird, Donnie Walsh, and Herb and Steve Simon for this opportunity.
"I also want to thank Nick Nurse for giving me my first professional coaching job 14 years ago. I'm looking forward to working with this great team to achieve our goal as NBA champions."
Bjorkgren is replacing Nate McMillan, who was fired in August after four straight trips to the playoffs. McMillan posted a 183-136 record in Indiana, including a 3-16 mark in the postseason.
The Pacers have made five consecutive postseason appearances but have been swept in the first round each of the last two years.