Several months ago, McQueary filed notice he intended to file suit against Penn State.
There was talk of an out-of-court settlement, but Tuesday, that scenario changed with McQueary filing the suit.
McQueary claimed he did what he thought was the right thing in reporting what he witnessed in a locker room between Jerry Sandusky and a young boy.
McQueary said Penn State administrators from former President Graham Spanier to former Athletic Director Tim Curley and Vice President Gary Schultz set out to discredit his story and reputation.
In the suit, McQueary recounted the testimony he gave a grand jury investigating the case against Sandusky.
He said he went to coach Joe Paterno, who said McQueary did the right thing.
Then, last November, the charges against Sandusky, Schultz and Curley were announced and Spanier responds by supporting Schultz and Curley.
Penn State President Rodney Erickson said McQueary was no longer coaching and placed on administrative leave.
McQueary contended that instead of reporting his story, Curley and Schultz did the opposite and tried to hide it from other law enforcement agencies.
McQueary claimed that in more than 25 years as a football coach, he would have made at least $4 million in salary.