Joe Royle moved to Everton in October 1994 and thier striker Graeme Sharp was named Oldham's player-manager. Sharp was unable to turn Oldham into genuine promotion club, despite most of the Premiership era squad still being on the club's payroll and, with another relegation battle looking likely, he left the club in the February of the 1996-97 season. Relegation to the third tier for the first time in 23 years was confirmed 3 months later following a loss at Reading.

Sharp was succeeded by Neil Warnock, who had previously attained promotion success with Scarborough, Notts County (twice), Huddersfield Town and Plymouth Argyle. He was however unable to repeat the same success with Oldham during the 1997-98 Division Two campaign and left after 1 disappointing season in charge, despite Oldham being in the play-off positions until the beginning of March.