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Nittany Lions coach James Franklin announced the hiring on Tuesday to replace Manny Diaz, who left to take over the Duke program.
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Allen was fired last month by Indiana after eight years as head coach. The 53-year-old Indiana native went 33-49 with the Hoosiers.
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Cignetti replaces Tom Allen, who was fired Sunday after seven full seasons in charge of the Hoosiers.
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Casey led the Big Ten and finished second in the nation in tackles for loss (20) and solo tackles (78).
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Allen led Indiana to bowl games in 2019 and 2020. But things spiraled downward quickly, and IU won just three Big Ten games the last three seasons.
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The Purdue Boilermakers have won three straight in the rivalry with IU.
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Indiana quarterback Brendan Sorsby ran for one touchdown and threw for another, leading the Hoosiers past short-handed Wisconsin 20-14.
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The Hoosiers were unable to turn a losing season around Saturday despite taking an early lead against Rutgers.
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The Hoosiers soon may have a third option at quarterback in Dexter Williams II. The junior started two games last year before tearing his ACL in the season finale against Purdue.
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The Hoosiers took a 7-0 lead late in the first quarter and didn't do much offensively for the rest of the game.