Mr McLaren's widow Bette carried out the unveiling at in Hawick's Wilton Lodge Park in front of a crowd of around 250 people yesterday.
The £11,500 statue was funded through public subscription and donations from local organisations in a project organised by the local community council.
Mr McLaren died in January 2010 at the age of 86, and his daughter Lynda Lawson said that seeing the bust for the first time was an emotional moment.
Speaking at the ceremony, she said: "It's wonderful. It's a great likeness and I hope lots of people come and look at it.
"I was very emotional when it was unveiled because of the physical resemblance to dad here in the park and it really tugged on the heart strings.
"The park is lovely and I used to come here with my sister. When I had my own children dad would come with us and take a rugby ball for the boys."
The commentator spent 49 years with the BBC. His first radio commentary was in 1953 as Scotland lost 12-0 to Wales.
Within six years he was working on TV and his wit and knowledge of the sport established him as a hugely renowned figure within the world of rugby until he retired in 2002. He was the first non-international to get into the International Rugby Hall of Fame, and was awarded a CBE for his services to the sport.
The bust of Mr McLaren sits near tributes to motorcycle heroes Steve Hislop and Jimmie Guthrie.
Marion Short, chairwoman of Hawick Community Council, said: "It was a very emotional moment when the bust was unveiled because the family had not seen it before. A few people were crying.
"It is a very good likeness and it captures Bill very well. It's lovely to have it here because we all knew how fond he was of Hawick."
Rob Brydon, who was behind the scheme, said: "I can't praise the sculptors highly enough.
"They didn't take it off a photograph, it was more off video tapes from the BBC and the McLaren family and I think they have got it spot on.
"We are delighted with it."