After retiring as a player Walley spent eight years as a coach at Arsenal before joining Crystal Palace in the same capacity in 1967. He became caretaker manager of Crystal Palace for six matches following the departure of Terry Venables in 1980. After the appointments of Malcolm Allison and subsequently Dario Gradi, Walley continued as a coach at Crystal Palace. He was later assistant manager to John Hollins at Chelsea during the mid-1980s, and reserve manager under Steve Harrison at Watford. His brother Tom played for Watford and Wales, and was a coach at Watford at the same time as Ernie. Ernie Walley subsequently managed Bangor City for a short spell in 1992.