The BBC reported earlier that Key, 46, had resigned from Red Bull-owned Toro Rosso and would move to Woking after an unspecified period of ‘gardening leave’.
A McLaren spokesman confirmed the hiring at the Hungarian Grand Prix.
The broadcaster also reported that Matt Morris had resigned as McLaren’s engineering director.
There was no immediate comment from Honda-powered Toro Rosso.
McLaren, Formula One’s second most successful team who won titles with the likes of Ayrton Senna and Alain Prost, have been restructuring their operations and parted company with Racing Director Eric Boullier this month.
Technical head Tim Goss was moved aside in April. Morris was one of a trio of technical bosses and his departure would leave only Peter Prodromou remaining as head of aerodynamics.
Brazilian Gil de Ferran, a former Indianapolis 500 winner, has been appointed sporting director with Andrea Stella taking over as performance director, responsible for trackside operations.
McLaren ended a three-year partnership with Honda at the end of last year and are now using Renault power units.
The switch has, however, highlighted the inadequacies of the car’s chassis which the team had previously believed to be one of the best on the starting grid but let down by an unreliable and under-performing power unit.
Team boss Zak Brown recognised this month that it could be a long time before McLaren were again challenging for championships.
“I think we are years away. I don’t know if that’s two or 10, or somewhere in-between,” he told reporters.
McLaren have not won a race since 2012 and are currently seventh in the championship, one place and 28 points ahead of Toro Rosso after 11 of 21 races.