He returned to the U.S. in 1977 for his first head coaching job at American International College, a Division II program which had losing records in the previous five years. In two years at AIC, his teams had a 28–25 record, including a win against Northeastern University, who was coached by Jim Calhoun at that time. In 1979, he was reunited with his former Davidson mentor Holland, who by now had become the head coach at the University of Virginia. Larrañaga became an assistant at a program that had begun to emerge as a power in the ACC, arriving at the same time as highly touted freshman Ralph Sampson. In seven seasons at Virginia, Larrañaga was on the bench for an NIT title in 1980 and NCAA Final Four berths in 1981 and 1984.