Born in Nelson, Lancashire, he spent most of his playing career at Burnley, Norwich City and Manchester United, with a short spell at West Bromwich Albion before retirement.

He made his league debut in January 1981 against Chesterfield and whilst at Turf Moor, gained England Youth caps[4] and a Third Division champions medal in 1982.

He was called into the England squad for the Rous Cup games against Chile and Scotland but did not play due to a hamstring injury.

Phelan was often deployed at right-back during his first season at Manchester United, but following the arrival of Denis Irwin in 1990 he mostly played on the right or in the centre of midfield.

By 1993, however, his appearances were becoming increasingly limited due to growing competition from younger players like Andrei Kanchelskis, Paul Ince, Ryan Giggs and Lee Sharpe.

After leaving Old Trafford, Phelan signed for West Bromwich Albion, where he spent 18 months and played just 21 games, his first-team chances limited by younger players such as Kevin Donovan and Lee Ashcroft, who were more favoured by new manager Alan Buckley (appointed in the autumn following the dismissal of Keith Burkinshaw, who brought Phelan to the club).

[7] In January 2010, Phelan was linked with a return to his first club Burnley as manager following the departure of Owen Coyle to Bolton Wanderers.

[11] On 9 January, Norwich appointed Hamilton Academical manager Alex Neil, and Phelan returned to his first-team coaching duties.

[17] On 3 January 2017, Hull City's vice-chairman Ehab Allam released a statement stating that the club and Phelan had parted company for a "fresh approach".

Less than six months later on 19 December, Phelan was appointed as a first-team coach for Manchester United's caretaker manager, Ole Gunnar Solskjær.

[21] In December 2021, following Solskjær's departure as Manchester United manager, his interim replacement Ralf Rangnick confirmed that Phelan would remain as one of the club's first-team coaches, though he was not involved in training sessions.