Nelson’s surprise departure from the National League One club, announced abruptly with six matches of the campaign to go, will mark the end of an association with Fylde that has spanned the best part of four decades, first as a player and then two spells as a coach.
Second-rower Arnold is currently the club’s forwards coach, having joined the Woodlands set-up in 2010.
He recently assumed coaching duties with England Counties U20s and was part of the backroom team for the recent England Counties v Scotland Clubs international at Fylde.
It is understood Fylde moved to secure Arnold’s future at the club after he reportedly received an offer from Sedgley Park to take up a coaching role there.
However, Fylde insist the switch-over from Nelson to Arnold was “planned succession”. Nelson will see out the rest of the season.
Fylde are fifth in National One and Nelson said the decision to step down had not been a “kneejerk reaction”.
Nelson, who began as a player at Fylde in 1977, said: “There comes a time in every sport when an era ends and a new period begins.
“I firmly believe in succession planning and have been helping Paul Arnold with his development as a coach, both with the club and Lancashire. I feel I have new challenges and new chapters to write.
“My mission statement when I began coaching Fylde for my second stint was to make us the leading rugby club in the North West outside the Premiership. We are currently 29th in the country, with only Sale Sharks higher in the region.”
Fylde chairman Andy Hiles said: “He (Nelson) will be a very hard act to follow. We believe Paul is the ideal candidate to build on Mark’s legacy.”