McDonald, 25, was on the transfer list at Sixfields and has agreed a two-year contract with the Sky Blues.
He is Coventry's third signing following relegation from League One, after striker Marc McNulty and midfielder Michael Doyle.
"He is a quick, strong and aggressive centre-half, who can also read the game well," boss Mark Robins said.
Liverpool-born McDonald started his career at Manchester City's academy before joining the youth set-up at Stoke City.
He later went on to Oldham, Colwyn Bay, Nantwich, Hereford United and AFC Telford United, joining Northampton in 2015 and making 37 appearances for the Cobblers.
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Coventry City have signed centre-back Rod McDonald from Northampton for an undisclosed fee.