A host of clubs had been chasing the Toffees striker, but Derby have won the race to land him ahead of the likes of Middlesbrough and Newcastle.
Skysports.comrevealed that the Rams had made their move for Vaughan and now they have confirmed his signature on a three-month loan.
"This is a terrific bit of business for us; James is a good player with an excellent attitude and tons of ability," Rams boss Nigel Clough told Derby's official website.
"He is also different to anything else we have at the football club at this moment, so will add some variety to our attack.
"He is strong, quick and brave and knows how to look after himself on the pitch.
"We are grateful to David Moyes, Bill Kenwright and Everton for allowing him to come here; I think they know we do things properly and will take good care of him.
"There were a number of other clubs in our division interested in James, so it is a big boost for us and Derby County in general that he has decided to come here."