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Pearson was appointed Watford manager on 6 December 2019 on a season-long contract. He was their third manager of the season after Javi Gracia and Quique Sánchez Flores. On Saturday, 29 February 2020, with Pearson as manager, Watford beat Liverpool 3-0. This was the first time in 44 games that Liverpool had lost in the Premier League.

After losing out on the managerial role at his former club Middlesbrough to Garry Monk, Pearson was appointed as the manager of Belgian First Division B side Oud-Heverlee Leuven on 22 September 2017. He was sacked on 3 February 2019.

After a year out of football, Pearson was appointed manager of Championship team Derby County on a three-year contract on 27 May 2016. On 27 September 2016, Pearson was suspended by the club pending an internal investigation following a row with owner Mel Morris. It was later claimed that the row began with Pearson's objection to Morris's use of drones to observe training sessions. Pearson left the club by mutual consent on 8 October 2016, with Derby 20th in the Championship.

In February 2015, following a home defeat by Crystal Palace in a game in which, at one point, Pearson put his hands around Palace's James McArthur's neck, while on the ground, the press reported that Pearson had been sacked. In a "night of confusion," it was reported by The Guardian that club staff, and even Pearson himself, had been told that he was sacked. However, the same evening, the club issued a statement stating that such claims were "inaccurate and without foundation." Following victories against West Ham United, West Brom, Swansea City and Burnley, with just one defeat, against Chelsea, during the month of April 2015, Pearson won the Premier League Manager of the Month for the first time. On 29 April 2015, following a 3–1 defeat to Chelsea, Pearson was again embroiled in controversy, when he called a journalist an "ostrich", "stupid" and "daft" during a post-match news conference. He apologised for his comments the following day.

On 16 May 2015, Leicester City confirmed their Premier League status following a goalless draw with Sunderland, becoming only the third team to escape relegation having been bottom at Christmas. Leicester finished the season in 14th place.

On 30 June 2015, however, Pearson was sacked, with the club stating that "the working relationship between Nigel and the Board was no longer viable." The sacking was linked to his son James's role in an alleged racist sex tape made by three Leicester City reserve players in Thailand during a post-season tour. He was replaced at Leicester City by Claudio Ranieri, who took Leicester to the Premier League title the following year as 5000–1 outsiders. Sports journalists gave Pearson credit for building the team that won the title, as did player Riyad Mahrez.

Pearson lives in Sheffield. He and his wife Nicky have a daughter Hannah and a son James, who plays professional football for Macclesfield Town. In an interview with The Daily Telegraph in 2014, Pearson said that he would have joined the Royal Air Force had he not become a full-time footballer.

At the end of the season, Pearson took a hard line on Leicester defender Wayne Brown, who had publicly said in front of his teammates – including some of ethnic minority backgrounds – that he had voted for the far-right British National Party in the general election on 6 May. He dropped Brown from the side for the play-offs. During the close season, Brown left the club to sign for Preston North End.

Pearson was sent to the stands in a 2–2 draw against his former club Middlesbrough, after the referee had allegedly "barged" into Leicester's dressing room unannounced, to which Pearson reacted angrily. The referee then left it to the fourth official to tell him he had been sent off. Pearson then appealed his sending off, saying, "I was giving my players instructions and there is no chance I will tolerate anyone coming in there who has nothing to do with my team. I'm within my rights to tell him to get out – he was telling me to hurry up. I can't wait to see the fall-out and I can't wait to appeal." Pearson's appeal was successful, and he faced no disciplinary action from the Football Association (FA). After an inconsistent season, Leicester ended the season ninth in the Championship.

The 2013–14 season saw Leicester recover from their play-off defeat of the previous season, starting well and sitting in first place at Christmas. It was during this time that the club started a club-record run of consecutive league victories, winning nine games from 21 December 2013 – 1 February 2014, which saw the club pull 10 points clear at the top of the Championship and earnt Pearson the Championship Manager of the Month award for January 2014. Continuing good results, which saw Leicester play 20 league games unbeaten until the end of March, also earned Pearson the award again in March 2014. Leicester ended the season as champions, winning promotion to the Premier League.

Leicester made a slow start to the 2012–13 season, losing three of their first five league games and suffering a surprising defeat in the second round of the League Cup at the hands of League Two side Burton Albion; however, a run of five straight victories saw Leicester sitting top of the table after 12 games and also earnt Pearson a nomination for Championship Manager of the Month in September. However, a drop in form in mid-season saw Leicester fall to fifth. The signing of Chris Wood, though, saw a rejuvenated Leicester go on another run of five consecutive wins, with Leicester reprising 2nd place in the Championship table, behind leaders Cardiff City, and Pearson this time won the Championship Manager of the Month award for January 2013. Again, a drop in form followed Leicester City's rise to second spot, and they only made the Championship play-offs on goal difference following their last gasp 3–2 win against neighbours Nottingham Forest on the last day of the season. After winning the first leg against third-placed Watford 1–0, Pearson's Leicester City narrowly lost the second leg of the play-offs 3–1, after Anthony Knockaert missed a last-minute penalty which would have sent them to Wembley.

Hull started the 2011–12 season with the club sitting one point outside the play-offs, having a game in hand in the middle of November; however, on 7 November 2011 Pearson requested permission to talk to his former club Leicester.

After Mandaric and Hoos had departed the club, Pearson was persuaded to rejoin Leicester City under their new ownership by chairman Vichai Raksriaksorn, and after days of negotiations he was finally re-appointed as manager on 15 November 2011 with Leicester sitting 12th in the Championship. Pearson started well, taking seven points from his first three games, which took Leicester into the top six for the first time since he had last been at the club, over 18 months previously, before Leicester faced the Hull City side Pearson had left just 18 days earlier. Leicester lost the game 2–1 thanks to a late Robert Koren strike, as Pearson was greeted with chants of "Judas" from the Hull fans. That result also signalled a downturn in form, beginning a run which saw Leicester fail to win for 5 consecutive games. However, after the new year, Pearson rang the changes for the trip to Crystal Palace in an attempt to get back to winning ways, recalling Aleksander Tunchev to play his first match of the season and bringing in reserve team player Tom Kennedy and 18-year-old youth academy graduate Liam Moore to make his first team debut for the club. His inexperienced team selection paid off as Leicester earnt a 2–1 victory to end their winless run.

Despite his relative success in his two years at Leicester, he often had a very strained relationship with chairman Milan Mandaric and chief executive Lee Hoos. In the summer of 2010, Mandaric showed a consortium of potential club buyers round the club without Pearson's knowledge and invited Paulo Sousa to the second leg of the play-off semifinal. The club then allowed Hull City to speak to him. Pearson said: "It doesn't take a rocket scientist to work out what's happening" – suggesting the club did not want to keep him. He then left Leicester to take the job at Hull City and Paulo Sousa was later appointed as his successor.

On 29 June 2010, he was appointed Hull City manager. Despite financial difficulties following relegation from the Premier League, Pearson was still able to enter the transfer market, bringing in players such as Nolberto Solano, James Harper, Liam Rosenior, Robert Koren and Jay Simpson. The club won their first away game in over a year at Norwich City in September. Following that victory, Pearson's club broke a 66-year-old record with 14 consecutive away games without defeat. The season ended with an 11th-place finish.

Veteran full-back Chris Powell also joined Pearson's coaching staff as a player/coach in the summer of 2009, as Leicester continued their upsurge in form under Pearson the following season in the Championship. Leicester completed a full calendar year of being undefeated at home, before a 2–1 defeat against Preston North End on 26 September 2009 ended the longest unbeaten home run in the country. Leicester spent almost the entire season in the play-off positions and an impressive month of February saw Pearson pick up the Championship Manager of the Month award. Leicester finished in 5th place in their first season back in the Championship, earning a place in the Championship play-offs and a chance of back-to-back promotions. They were defeated by Cardiff City following a penalty shoot-out in the play-off semifinal, despite fighting back from a 2-goal aggregate deficit in the second leg to briefly lead 3–2.

On 18 February 2008, Pearson was appointed as manager of Southampton on a rolling contract. On 19 February 2008, his career at Southampton got off to a poor start, losing 2–0 at home to Plymouth Argyle in front of 17,806, the lowest recorded crowd at St Mary's Stadium. On 22 February 2008, Southampton gained their first point under his managership, drawing 1–1 away to Scunthorpe United.

On 4 May 2008, with only one game to go, at home to Sheffield United, the Saints were in 22nd place and facing relegation to League One. After going 1–0 down, Pearson's side pulled-off a comeback to win the game 3–2, their goals scored by Marek Saganowski and two from Stern John, who was also sent-off. Southampton secured Championship status for another season, at the expense of Leicester City, who could only manage a 0–0 draw with Premier League-bound Stoke City, and were relegated to the third tier of English football for the first time in their 124-year history . On 30 May 2008, Pearson was replaced by Dutch coach Jan Poortvliet after only three months in charge.

On 20 June 2008, Pearson was appointed as manager of Leicester City. Craig Shakespeare became the club's first team coach and co-assistant manager alongside Steve Walsh (a former Chelsea chief scout, and not the former Leicester City player of the same name). As well as having worked together on the West Bromwich Albion coaching staff, the two had also played together at Sheffield Wednesday. Shakespeare once said that Pearson was the best captain he had ever played under. Pearson was named League One Manager of the Month for August 2008 after Leicester won three of their first four games, scoring nine goals and conceding only once. After the disappointing defeat of losing 3–2 away to Brighton & Hove Albion despite being 2–0 up at half-time, Leicester bounced back with a club-record 23-match unbeaten run in the league between 1 November 2008 and 7 March 2009, before finally being beaten 2–0 by Tranmere Rovers. He was again named the League One Manager of the Month during that run in December 2008. On 18 April 2009, Leicester won 2–0 at Southend United, confirming their promotion back to the Championship as League One champions. The season finished with the club racking up their highest ever points tally of 96 points, as they lost just four of their 46 league games.

On 1 February 2007, Pearson was confirmed as assistant coach to Stuart Pearce, the England U21 team manager, until after the 2007 UEFA European Under-21 Championship. As Pearce's contract limited him to involvement in only one friendly before the Championship, Pearson led the under-21s in their 3–3 draw against Italy on 24 March 2007, the first game at the new Wembley Stadium.

When Newcastle manager Glenn Roeder resigned on 6 May 2007, Pearson took charge of the remaining game of the season, away to Watford. Pearson stayed on at Newcastle as a coach following the arrival of Sam Allardyce as manager at the club. On 9 January, following the departure of Allardyce, he was re-appointed as caretaker manager for Newcastle's trip to Manchester United. Newcastle lost 6–0, after a Cristiano Ronaldo hat-trick, a brace from Carlos Tevez and a Rio Ferdinand goal. On 16 January 2008, after Kevin Keegan had been announced as the next permanent manager of the club, Pearson took charge of the team for the 3rd round FA Cup replay against Stoke City, which Newcastle won 4–1. On 8 February, Pearson left the club.

On 19 October 2006, he was linked with the Sheffield Wednesday manager's position but instead took over as assistant manager of Newcastle United, replacing Kevin Bond, who was dismissed following allegations he was prepared to take bungs for players whilst at Portsmouth.

Pearson moved to West Bromwich Albion in November 2004 as assistant manager to Bryan Robson, and took over as caretaker manager when Robson left the club in September 2006. Albion won three and drew one of his matches in charge, before stepping down from the role in preparation for the arrival of new manager Tony Mowbray.

In 1999, he was recruited as Stoke City's first team coach by Gary Megson. Although Megson was sacked later that year by the club's Icelandic consortium, Pearson was kept on for a further two years under Guðjón Þórðarson, before being sacked in 2001.

As manager of Carlisle United, Pearson helped to keep the club in the Football League at the end of the 1998–99 season. He signed goalkeeper Jimmy Glass on loan, who scored an injury-time goal against Plymouth Argyle, saving the club from relegation to the Football Conference at the expense of Scarborough. The match was Pearson's last in charge of the Brunton Park outfit.

Middlesbrough manager Bryan Robson signed Pearson for £750,000 in 1994. Pearson captained them to promotion twice and to three domestic cup finals. Pearson retired from playing in 1998.

The following season, Shrewsbury finished one place higher but injuries restricted Pearson to 26 games. Injury prevented him from playing at all in 1984–85, when Shrewsbury again finished eighth in the table, but he returned in 1985–86 making 35 appearances as Shrewsbury dropped to 17th. In 1986–87 he was an ever-present, making 42 appearances and contributing three goals, as the Shrews finished in 18th place. He started the next season, before being signed by Sheffield Wednesday's manager Howard Wilkinson on 12 October 1987 for a fee of £250,000.

Pearson moved to Sheffield Wednesday in 1987. He won the League Cup as Sheffield Wednesday captain, during the 1990–91 season, being selected as "Man of the Match" in the final at Wembley. In the same season, he also helped Sheffield Wednesday win promotion to Division One. During the 1992–93 season, he helped Sheffield Wednesday reach both domestic cup finals, but broke his leg in the League Cup semi-final, and therefore could not play in either final. In all, Pearson made more than 200 appearances for the Owls, scoring 14 league goals – including the club's first in the Premier League in a 1–1 draw with Everton at Goodison Park on the opening day of the 1992–93 season.

Pearson was born in Nottingham where he attended William Sharp Comprehensive School, and began his playing career with non-league Heanor Town before joining Second Division Shrewsbury Town in November 1981. He made his first-team debut in a 1–0 defeat at Oldham Athletic on the opening day of the 1982–83 season. Pearson's first Football League goal came on 12 March 1983 in a 3–1 win against Barnsley at Gay Meadow. Pearson ended the season with 39 out of a possible 42 starts as Shrewsbury finished in ninth place in the table.

Nigel Graham Pearson (born 21 August 1963) is an English football manager and former professional player. During his playing career, he was a defender and played for Shrewsbury Town, Sheffield Wednesday and Middlesbrough. As a coach he has taken charge of Hull City, Southampton, Carlisle United, Leicester City, Derby County and OH Leuven and was assistant manager for England Under-21s and Newcastle United. He has been the manager of Premier League club Watford since December 2019.