After retiring he began working as a manager, going on to coach several clubs in Spain, Greece and Russia before being appointed at Watford in January 2018.

[3] From June 2020 to May 2021 he worked with Valencia, and a year later he won the Qatar Stars League during a brief spell at Al Sadd before managing Leeds United for three months in 2023.

In February 2003, after being scarcely played in his last one and a half seasons at Villarreal, the 32-year-old Gracia joined Córdoba in the second level, closing out his career in June of the following year.

[11] After starting his managerial career with the youth sides of his former club Villarreal,[12] Gracia worked in the Segunda División B with Pontevedra, finishing first and second with the team in the regular season but always falling short in the promotion playoffs.

[25] On 4 September 2013, Gracia was appointed at his hometown club Osasuna on a two-year deal, replacing the fired José Luis Mendilibar.

[27] His team were relegated in 18th place on the last day, ending 14 years in the top division, despite winning 2–1 against already condemned Real Betis;[28] results included heavy defeats against his former teams and rivals Real Sociedad and Athletic Bilbao and a 7–0 loss at Barcelona,[29][30][31] but also a 3–0 home win over reigning champions Atlético Madrid on 23 February 2014.

[44] On 7 December 2021, Gracia was hired by Al Sadd in the Qatar Stars League, after his compatriot Xavi had left for Barcelona; he signed until 2023 with the option of one more year.

[47] On 21 February 2023, Gracia returned to England and its top flight after replacing the sacked Jesse Marsch at the helm of Leeds United.