The England international has been the subject of two failed bids from the Blues, with Jose Mourinho’s men expected to submit another offer after Monday night's clash with United at Old Trafford.
Phelan left the champions in May having worked under Sir Alex Ferguson since 2001, and says he does not expect the Red Devils to allow Rooney to leave without having first signed a replacement.
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"Who will they replace Wayne Rooney with? That's the question. The ones they had on the radar they don't seem to be able to nail down yet, so I think Wayne Rooney will continue to be a Manchester United player for the not-so-foreseeable future.
"What will happen during the season and going into the next transfer window nobody knows."
Rooney’s relationship with manager David Moyes has come under the spotlight this summer, particularly after the Scot hinted he was behind Robin van Persie in the pecking order.
However, Phelan feels any such misunderstanding is in the past and that Rooney is at the right club.
"That was a personal issue between him, the club, the manager, and he made his point clear," he added.
"I think deep down Wayne is that type of player where he needs to feel comfortable.
"He wants to play his football on the biggest stage and I think he's got that where he is.
"If there's something else on the horizon we'll find out later. But I don't think there's been too many clubs who have actually said 'we will take Wayne Rooney'."