Sillett left the club in November after a run of poor results, and was replaced by Terry Butcher who arrived as a player-manager from Rangers.

Under pressure to change something, and with regulars Dean Emerson and Lloyd McGrath injured, Sillett signed players from Europe to add depth to the team.

Star striker David Speedie was dropped from the team after a run of poor performances, and by November the club were in sixteenth position.

[8] Butcher was still an active player for Rangers at the time, and had been captain of the England team during their World Cup semi-final against West Germany in the summer, so he arrived as player–manager and the club had to pay a transfer fee of up to £450,000 for him.

Butcher bought Ray Woods from Wigan Athletic, but was forced to sell the promising young players Steve Livingstone and Tony Dobson, who both left for Blackburn Rovers.

[11] Following defeats to lower-division and non-league opposition in the previous two seasons, Coventry faced the possibility of another upset in the third round against Wigan Athletic.

[8] Wigan had some future top-flight players in their team including Peter Atherton, who later signed for Coventry, but were having a poor season, being in seventeenth place in Division Three.

[14] In the fourth round in late January, a few days after their defeat in the League Cup quarter final, City again drew 1–1 at home against Southampton with Alan Shearer equalising after Brian Kilcline's opener.

The campaign began in September with a two-legged second-round tie against Bolton Wanderers, in which City won both their home and away games by scores of 4–2 and 3–2 respectively.

The visitors dominated the first half but were unable to score, and then suffered the set-back of losing former Coventry player Dave Bamber.

[18] City had to wait almost two months for their next match in the competition, the quarter-final tie at home to Sheffield Wednesday of the Second Division.

Coventry created few chances in the game, with player-manager Terry Butcher sustaining an injury as well, and Nigel Pearson's 9th-minute goal was enough to win the tie for Sheffield Wednesday.