Eustace had guided Blackburn to fifth in the Championship, while Derby sit just above the relegation zone in 21st place.
Despite the surprising move, Eustace lives near Derby and had grown frustrated with Blackburn’s lack of backing for future plans.
Rovers’ statement read: "Blackburn Rovers can confirm that John Eustace has left his role as Head Coach to take up a position with another Championship club.
"While we are disappointed by his decision to leave at this crucial stage of the season, we fully understand that the opportunity to move closer to his family and return to a former club played a significant role in his choice.
"The club had hoped that John would see out the season and continue the fantastic work he has done, particularly after strengthening the squad in January and guiding us into a strong position in the league. However, with 14 games remaining and a real chance to push for a play-off place, the focus remains on achieving our ambitions.
" Football is always evolving, and while we part ways with John Eustace, this also presents an exciting opportunity for the new head coach to build on our current positive position. We remain in a good place in the league and the togetherness of the players, staff and supporters can all play a huge role in making it a successful end to the season.
"We would like to thank John Eustace, along with his assistants Matt Gardiner and Keith Downing, for their dedication and hard work over the past year. We wish them all the best in their future endeavours. David Lowe will continue to take temporary charge of first-team affairs, supported by Damien Johnson, Ben Benson, Mike Sheron and Paul Butler, until a permanent successor is appointed."