The 25-year-old shot-stopper will join The Rams on loan initially, until the end of the month, when he will sign a 3-year deal for an undisclosed fee.
Bywater was regarded as one the most talented young ‘keepers in England when he joined the Hammers in 1998 but he failed to make the required impact and has since been on loan to a number of clubs.
Bywater made his debut for Derby this Saturday evening helping them to a 1-2 victory over Hull City.