Phelan will be the assistant head coach at Plymouth Argyle, working under Wayne Rooney.
The 62-year-old worked at Old Trafford over a nine year period, under both Sir Alex Ferguson and Ole Gunnar Solskjaer.
"Mike is someone I know well having worked with him when I was a player at Manchester United and he has vast experience at the highest level of football," said Rooney in a statement on Plymouth's website.
"I am really pleased to bring him to Argyle and look forward to seeing him get to work immediately."
Plymouth are currently struggling in the Championship, as they have one win from the past nine matches.
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