Chisholm again became Ian McCall's assistant, this time at Dumfries club Queen of the South, until McCall's departure from the club at the end of the 2006–07 season. Chisholm then accepted the role as manager, appointing Kenny Brannigan as his assistant manager. Chairman Davie Rae also announced that the club would become fully professional that season. In March 2008, Chisholm guided Queens to only their second ever Scottish Cup semi-final appearance with a 2–0 quarter final victory against Dundee, a game notable for a goal from 84 yards by Ryan McCann. Queens followed this with a 4–3 win against Aberdeen in the semi-final, which meant that Chisholm had guided Queens to their first ever Scottish Cup Final appearance. Despite second half Queens goals by Steve Tosh and Jim Thomson, Rangers ran out 3–2 winners in the Final. Queens finished fourth in the Scottish First Division.