Shields announced earlier in the day that Fenton had been relieved of his first-team management responsibilities.
Phillips, 48, has expressed an interest in the vacant role at the Stadium of Light previously following the departure of Jack Ross in 2019 and of Phil Parkinson the following year.
'Should have been sent off' - Sunderland fans fume at Ilias Chair as QPR goalkeeper Seny Deng scores
Sunderland 2 QPR 2: Highlights after Seny Deny’s equaliser plus Ross Stewart and Ellis Simms goals
'Sublime': Phil Smith's Sunderland player ratings after Seny Deng's late equaliser for QPR
Sunderland's Championship rivals Wigan beat Rotherham to ex-SAFC striker signing
Championship news: Sunderland’s rivals set to lose striker as Leicester City sign goalkeeper amid Daniel Iversen speculation
However, an approach from Sunderland to Phillips was not forthcoming with the former European Golden Shoe winner deemed too inexperienced to take the reins on Wearside
The South Shields job is Phillips’ first foray into management with the one-time Blackpool attacker having previously enjoyed coaching stints with Leicester City, Derby County and Stoke City.
He has, though, been out of coaching work since 2019 following a seven-month stint under then-Potters boss Gary Rowett.
The Mariners currently sit in third position in the Northern Premier League Premier Division.
The former England international striker will oversee his first game as manager on Saturday as Shields take on Warrington Town away from home.
Phillips’ stellar playing career reached its height during his time with Sunderland between 1997 and 2003.
The striker, nicknamed Super Kev, scored 130 goals in 235 appearances for the Black Cats as and became a club legend.
Phillips league 113 goals for Sunderland made him the club's leading post-war goalscorer and he still remains the only Englishman to have won the European Golden Shoe, having netted 30 times in the Premier League in the 1999-2000 campaign.
That form helped to earn him eight senior caps for England, and he was part of Kevin Keegan’s squad for Euro 2000.
Speaking to South Shields’ website Phillips said: “I’m absolutely delighted to come on board having been given the opportunity to manage South Shields.
“This is my first taste of management so I’m eager to get going and I’m very, very excited.
“I’d like to thank Geoff Thompson for giving me this opportunity. I’m very grateful for it and am looking forward to working with Geoff and everyone connected with the club.
“The club is very ambitious and is an exciting place to be, which is demonstrated by the investment which has been made in the team and the facilities.
“I’m really looking forward to being part of it and hopefully helping the club move forwards.”
He added: “I’ve never been shy in saying I’d love a crack at management when the right opportunity arose, and Geoff completely sold this club to me.
“The club is in an area I know very well and have a great affection for, and coupled with that it has great ambition and a vision to grow.
“I’m licking my lips to be part of it.
“I want to win games and be successful, and I hope myself and the players will enjoy the ride together.
“It’s about winning football matches and trying to find a style that is exciting to watch, on the front foot and giving players the freedom to go and play.
“There’s a lot of hard work in front of us but it’s important to have an enjoyable environment in place so that the players come into work, enjoy what they do and get the most out of themselves.”
So highly is Phillips thought of in Sunderland, that he became the latest Black Cat hero to be immortalised by mural artist Frank Styles on a Sunderland pub back in November 2020.
A Crowd Funding page has been launched to raise the £3,500 needed to pay for the artwork, which spans the side of The Times Inn pub in Southwick.
It follows the striking Jimmy Montgomery mural, also crafted by Styles, which was also unveiled in the summer of 2020, joining the portraits of Sunderland legends Raich Carter in Hendon and Bobby Gurney in Silksworth.
South Shields chairman Geoff Thompson, talking of Phillips’ pedigree said: “We are incredibly excited about the prospect of Kevin joining us and leading our first team.
“His pedigree, background and experience in the game are substantial and I’m sure he’s going to make a massive impact on the club.
“I’m sure everyone connected to the club will join me in welcoming Kevin with open arms, and I very much look forward to working with him over the coming years.”
It is also thought that Phillips could turn towards fellow ex-Sunderland player Gavin McCann to assist him at Mariners Park.
McCann – who was also capped internationally by England whilst a teammate of Phillips’ at the Stadium of Light – has enjoyed a mixture of non-playing roles between coaching and setting up The Milligan-McCann Academy aimed at eight to 12-year-old prospects.
In 1998, McCann moved to Sunderland from Everton, where he was a member of the side which won the Division One title and promotion to the Premiership with 105 points under Peter Reid the following year.
The former midfielder, 48, joined Aston Villa in 2003 and then had a stint with Bolton Wanderers between 2007 and 2010 before retiring.
Phillips is due to meet the press on Thursday ahead of taking training for the first time and a further announcement regarding his backroom team will be made at the “earliest opportunity,” according to the club.