He is the club's sporting director.
But he will be joining Ole Gunnar Solskjaer in temporarily taking charge of the United team until the rest of the season.
And he has been given a blessing to take on the job by the Mariners.
"Taking on a temporary coaching role at Manchester United is extremely exciting," Phelan said in a statement.
"It's also a really positive step for the Mariners to have a direct link with Manchester United as I will continue my role as sporting director.
"I'm still a Mariner. I've put something in place that I want to see through. This might be a small distraction, but it's with one of the biggest clubs in the world that I simply couldn't turn down.
"I was offered the opportunity at the Mariners to pass on my experiences and wisdom in order to develop the football club back into the football club that it once was.
"It's an exciting project, that's my remit and we've put a structure in place with full time academy coaches that will ensure that we are prepared for success.
"Part of the discussion with Manchester United was that I will still be available for the Mariners, this is a dual role. I will take the first opportunity possible to get back to the Central Coast. I'm not going anywhere, I am one phone call away from anyone at the Mariners.
"I will be back on the Central Coast as soon as I can. There's obviously a few issues to sort through at Manchester United which will take time, but once we've worked through that I look forward to getting back to the Central Coast."