A former Head of Youth at Fleetwood Town, Rooney has spent the past two seasons in League Two with Crawley Town and Carlisle United.
He fills the void left by the resignation of long-serving manager Steven Cunningham.
Chairman Ryan Haigh said: “We couldn’t turn down an opportunity to have such a bright young coach head up our team for the next season, and we are really pleased to have Nathan on board.
"The fact that Nathan, being a local lad, is excited and willing to join Colne is both a coup for the club but also shows the character of Nathan, in that he shares our vision and ambition for progress.
“The players will no doubt be keen to start working alongside someone that has already gotten some experience in the leagues, and I’m sure that Nathan’s professionalism will filter down throughout the whole club from the moment we get things up and running again."
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