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Phelan began his career at Burnley, signing as an associated schoolboy in July 1979, as an apprentice two years later and as a professional in July 1980. He made his league debut in January 1981 against Chesterfield and whilst at Turf Moor, gained England Youth caps and a Third Division champions medal in 1982. But in 1985, Burnley were relegated to the Fourth Division, and Phelan moved to Norwich City for £60,000 on 13 July 1985.
In Coaching career Phelan moved on shortly afterwards, taking up a role at Manchester United's Centre of Excellence. With Steve McClaren's departure to Middlesbrough in the summer of 2001, Phelan was promoted to first-team coach. He was appointed assistant manager of Manchester United on 3 September 2008, replacing Carlos Queiroz who had left to manage the Portuguese national team.
In January 2010, Phelan was linked with a return to his first club Burnley as manager, this following the departure of Owen Coyle to Bolton Wanderers.
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