The news clarifies inaccurate reports that Derry's appointment at the League One club is as a player/manager.
The 35-year-old would not have been able to play for the Magpies this season anyway, having already turned out for Championship sides QPR and Millwall.
The rules stipulate that a player can be registered with a maximum of three clubs during one season but can only play for two of them.
Succeeding Chris Kiwomya as manager at Meadow Lane sees Derry return to the club where his professional career began in the mid-1990s.
The Nottingham-born midfielder went on to play for seven other clubs, including Sheffield United, Portsmouth, Crystal Palace, Nottingham Forest and Leeds, where he became friends with his choice for assistant manager Greg Abbott, making almost 600 career appearances.
Asked if taking his first step into management meant an end to his playing days, Derry said: "It had to end someday and I wanted it to be on my terms.
"I didn't want to be playing until I was 39 with fans on the sidelines saying I'm past it, which I wouldn't have let happen anyway because I have always looked after myself.
"I'm here to make an impression and if I can do that out on the training ground then there is no need for me to play."
Derry, who was part of Notts County's Division Three title-winning team in 1998, had been under contract as a player at QPR until next summer and was on loan at Rangers' Championship rivals Millwall, where he was scheduled to remain until January 1, 2014.
He spent Wednesday morning finalising the termination of his contract at Loftus Road, and both London clubs refused to stand in the way of Derry's opportunity to test himself in management.