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Following days of speculation, Nelsen was officially confirmed as head coach of the MLS side at a press conference this morning.
The club's president and general manager Kevin Payne said a player/manager role was never considered for Nelsen.
Nelsen told media he was definitely ready to end his playing days.
"I think my knees have been telling me that for about two or three years now and the grey hairs on the side of my head as well."
Payne was in charge at DC United during Nelsen's spell there which included an MLS title in 2004 and said even then he knew the New Zealander would make a good head coach.
"From the day Ryan arrived in DC as a 23-year-old player, I always knew he would be a head coach someday," Payne said.
"I believe his leadership qualities, intelligence, preparation and character will contribute to his success as a coach. I couldn't ask for a better person to lead our club."
Nelsen told media he had not spoken to New Zealand Football to discuss his international future. The All Whites' next World Cup qualifiers, against New Caledonia and the Solomon Islands, are scheduled for March.
"I haven't had a chance to talk to the coach or the chairman of New Zealand Football, and I'll be talking to them very soon," Nelsen said.
The 35-year-old is under contract with English Premier League side Queens Park Rangers until June 30 this year; however, he has requested to enter dialogue with QPR boss Harry Redknapp to discuss when he will join up with his new club.
"Harry Redknapp and Tony Fernandes, the owner of QPR, are fantastic people. They are such nice people. I've got some obligations at QPR that we have just got to go through. It has been a bit of whirlwind so there are some details we have to go through," Nelsen said.
"They understand that when I play I am playing on glass knees and glass ankles. It is a bit of a struggle. They know I am at the end but they also know the predicament they are in. It is a major predicament.
''Getting out the English Premier League has major financial implications and there is a lot of pressure from fans, the media and so on, so I have an obligation.
"I really want QPR to stay up and to kick on for Harry and because of the owner. They are just fantastic people. They would like me to keep playing but we have to sit down and talk. If we can get five straight wins, that'd be perfect. I think then we can shake hands [and part company] but we are just going to have to talk and see how things progress."
Meanwhile, Nelsen will be available for QPR's fixture against Tottenham this weekend.
Nelsen currently has 49 'A' international caps for the All Whites after making his debut in 1999, the last of which came against Tahiti in his hometown of Christchurch in October last year.