On 26 January 1965, MacDonald agreed a £4,000-a-year contract to return to Kilmarnock as manager on 1 July 1965. The club had finished the 1964–65 season as First Division champions for the first time in the club's history, but MacDonald could not build on that and accumulated a third and two seventh-place finishes, though he took Killie to the semi-finals of the 1966–67 Inter-Cities Fairs Cup. He was sacked on 2 April 1968.
