The former Old Trafford assistant manager says the England international could be tempted to leave the Premier League champions this summer in pursuit of a new adventure
The 27-year-old, who handed in a transfer request last season, is believed to be set for crunch talks with new boss David Moyes in the coming days, with the striker hoping to gain assurances about his role in the first-team.
Phelan, who left United following Moyes' reshuffle of the backroom staff, is adamant there is no better place for Rooney to ply his trade than at Old Trafford, but admits he could seek a fresh challenge away from the club.
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"Unless you want a fresh challenge and you feel that challenge isn't being met at Manchester United.
"Every player is entitled to express a desire to want to move on. Any player can do that at any time.
"In Wayne's case, in the first instance in 2010, he took a lot of advice on that and got steered towards making that call but the manager was terrific. He talked to him and asked why would he want to leave the club?
"The press conference Sir Alex gave was a bit of a tear-jerker and it was genuine. There was an element that he'd chased this boy and paid big money. He was the boy that could change United."
Phelan expects the Red Devils to make a decision on Rooney's future soon but admits he doesn't know whether he will stay or go.
"Somewhere down the line there will be words said, there will be meetings and they will see if it's still alive and worth going for or they'll call time on it," Phelan added.
"He's come from a fresh-faced 17-year-old and has been under the spotlight for that time and he has delivered. He might have hit a blip in certain performances but he isn't the first or last player to have done that.
"You have to nurse them through it and hopefully he responds to that. Sometimes you have to crack the whip with him. Wayne has responded as well as he feels he can do for United, and what will be will be - I haven't got a clue."