Phelan worked as assistant manager to Sir Alex Ferguson during the final years of his reign at Old Trafford, and will form part of Neil Adams's backroom staff at Carrow Road.
Phelan was assistant manager to Sir Alex Ferguson during the final years of the Scot's spell at Old Trafford and was part of a winning formula at Old Trafford.
He has previously worked at Carrow Road under Gary Megson from 1995 to 1999, and also managed the sides reserve team. This was after a playing career with the Canaries spanning four years in the 1980s, where he was also captain of the club.
Phelan told the club's website: "I am delighted to have the opportunity to return to Carrow Road. I have many fond memories and am looking forward to helping Neil and the team to progress and ultimately getting back into the Premier League where they deserve to be."
Norwich are in contention for the play-off and promotion spaces. They currently sit in 10th place, six points off the summit as they try and bounce back from last season's relegation from the top flight, and manager Neil Adams said he was delighted with Phelan's appointment.
He said: "It's really important that we replaced Mark Robson with the best possible coach we could find and I decided Mike was the outstanding choice.
"I'm delighted to bring in someone with Mike's experience to work with myself, Gary Holt, and the rest of the coaching staff. He's someone who has a strong connection with Norwich City and I know him well, having worked with him before when I was a player and he was coaching here."
Some may speculate that Phelan could be a long term replacement for Adams if things were to go awry at Carrow Road, but the reaction from Adams in his statement reflects a man who is content to have an individual of Phelan's calibre amongst the coaching staff.