He retired from playing in 1987 and commenced his coaching career with York as youth-team coach and obtained his Football Association coaching badge in May 1990. He led the youth team to the quarter-finals of the FA Youth Cup for the first time in the 1992–93 season. He took over as youth-team coach at Sunderland in 1994 and was later promoted to reserve team coach. He moved to Manchester United as reserve team coach on 20 November 2002, where he built up a successful reserve side, nurturing the fledgling talents of Kieran Richardson and Darren Fletcher, amongst others. He was appointed as first-team coach of Bolton Wanderers on 10 October 2005. After the departure of Sam Allardyce from Bolton on 29 April 2007, Sammy Lee was appointed as manager of Bolton, with Sbragia retaining his position as first-team coach alongside Jimmy Phillips and Gary Speed.