After leaving Liverpool he became player-manager of Swansea City, where he spent two years, and then managed Kidderminster Harriers, guiding them to promotion to the Football League in 2000.

The season culminated in a man of the match performance in the first-ever all Merseyside FA Cup final playing a part in all three Liverpool goals.

Having lost the league title to Liverpool a week earlier, derby rivals Everton were looking for revenge and took a 1–0 lead into the half-time break, courtesy of a Gary Lineker strike.

Mølby was also involved in the third goal, when Rush latched on to a chipped pass from Ronnie Whelan to put the final out of Everton's reach and complete the double.

During their League Cup run, which ended with a 2–1 defeat at Wembley against Arsenal, he scored a hat-trick of penalties in a fourth round replay at Anfield against Coventry City.

In 1988–89, Mølby returned to regular first team football, playing in central defence in the absence of the injured Alan Hansen, and scoring the winning goal against Manchester United at Anfield in the second league game of the season.

[4] The club decided to stand by him, and he returned to the first team in January 1989 in Hansen's continued absence, but suffered another injury in March which kept him out for the rest of the season.

In April 1989, Mølby, along with his teammates, rallied round the bereaved families of the Hillsborough disaster attending a number of the funerals.

In September 1990, before an away league match against Everton, Radio 5 commentator Mike Ingham remarked that "Mølby's still only a substitute even though he'd probably walk into any other first division team".

Another injury to Whelan in a home league game against Everton in February 1991 gave Mølby another chance to re-establish himself, and he enjoyed his longest run of matches for four years.

After suffering an injury in a 2–2 Premier League draw against Manchester United at Old Trafford on 18 October 1992, Mølby's career began to decline.

He was a squad player (appearing generally as a substitute) with the Danish international side which competed in the 1984 European Championship and 1986 World Cup.

He had taken Swansea to the Division Three playoff final five months earlier, but they lost to a last-minute goal by Northampton Town's John Frain.

Pursuing a career as a TV pundit, Mølby was finally offered the manager's job at Kidderminster Harriers, then in the Football Conference.

Utilising the existing squad of players, but adding his own in a few key positions (ex-Liverpool teammate Mike Marsh was drafted in to great success) Harriers won the Conference title (and promotion to the Football League) in Mølby's first season in charge.

Two seasons of decent Division Three form followed, before overtures from Hull City prompted Mølby's departure for East Yorkshire.