The 38-year-old has been without a club since leaving the Gulls last year after two years at the helm and links up with Penzance-based side Mousehole.
The club currently ply their trade in the South West Peninsula League and Nicholson joins at player/manager and director of football.
Speaking to Cornwall Live, he said the project at the club was the defining factor in his decision.
He said: “I was taken aback by the club’s footballing philosophy, coaching set-up, use of technology, committee support, infrastructure, fantastic academy and forward-thinking ambition.
“I’m incredibly excited to take it all to the next level. I’m also buzzing to be back playing.”