Fleming (43) was told only this week he was going to be coach of the side, taking over from Phelan.
He now has the job of getting a squad together in time for the opening game of the season against competition heavyweight Auckland City at Carisbrook on November 1.
Phelan will be taking over Otago United's new youth team and primary schools development programme, after four lean years in charge of Otago United.
The former Republic of Ireland international could not be contacted yesterday, but Otago United general manager Marc Chidley said it had taken a while to get the coaching positions finalised as the club wanted to wait until Phelan had returned from coaching in the United States.
"We wanted to sit down and talk to Terry about the future. He wanted to be involved with our youth team and also our new kids' development, and then to ask him to still coach the main team would be just too much," Chidley said.
"It was just the circumstances of the situation and the fact Terry was away in the United States for so long."
He had heard rumours of Phelan wanting to take legal action over losing his position but said that was not true.
Phelan had been coaching in the US for four months and had only returned to Dunedin earlier this month.
Fleming was assistant coach for the side over the past couple of years, and said though taking the job so late was far from ideal, he was willing to roll his sleeves up and get on with it.
"Auckland City have a pre-season game this weekend and then have a couple more friendlies organised before they play us first up. I'm still ringing around trying to see if guys are interested in playing for us," Fleming said.
But Fleming, who works for New Zealand Post as a team leader in postal delivery, said there were players who were keen to play, and it was vital for football in the region to have a team in the national league.
"The players need to have something to strive for. Guys who are in the squad now were looking up and aspiring to make that team five or six years ago. Now they need to play hard for the team to inspire those young players now."
Fleming, who has not had time to appoint an assistant, believes he should have been given the job six months ago, but said he had to live with what had happened.
The side has had a poor past three years, winning just seven games out of 56, finishing bottom of the New Zealand Football Championship in 2006-07 and second bottom in each of the past two years.
Key striker Aaron Burgess is a non-starter for the side because of business commitments, while Fleming is not interested in signing Blair Scoullar.
Midfielder Andy Coburn is also in doubt, as he intends to play cricket, while young striker Tom Jackson has taken up a football scholarship in the US, as has Seamus Ryder.
Last year's captain, defender Colin Falvey, has gone to the US.
Fleming said players such as Robbie Deeley and Tim Horner were keen to play, as were Caversham English imports Chris Jenkinson and James Waggett.
"As long as we can get 15 to 16 players in a squad and get a pre-season game arranged, then we'll be all right. I think for the sake of football in the South Island we need to have a team in Otago."
Chidley said the situation was far from ideal, but it was always going to be tough in Dunedin, playing against sides with more players to pick from and bigger budgets.
Otago United had a budget of about $300,000 and could not afford to pay players.
The Otago United youth team, to be coached by Phelan, would play in the youth league, which would play one round of games starting in January.
Teams in the North Island had budgets double that of Otago United, Chidley said.
Chidley confirmed all home games would be played at Carisbrook, and said it was a great surface to play on.
Last year, the side had played at Sunnyvale in front of meagre crowds.
He said the club was not helped by the uncertainty of what form the national league would take next year.
