McDonald, who previously had a spell in charge at Brunton Park eight years ago, was among the front-runners to take over the hotseat of the League Two strugglers.
But Sam Allardyce’s No 2 at Upton Park has decided to stay at Upton Park.
McDonald started his playing career at his local youth team Wallsend Boys Club before joining Carlisle United as a schoolboy, where he represented England at schoolboy level.
He then joined Newcastle United as an apprentice where he went on to play over 200 league and cup games. He also was an England Youth and England under 21 international while at St. James'.
McDonald then joined Everton, for £525,000, in the summer of 1988.