The 56-year-old assumed the role at the weekend after Colin Cameron decided to step aside.
The Northern Irishman had been out of work after leaving Hibernian following the appointment of Terry Butcher last month, but has now returned to the club where he was in charge during the 2010/11 campaign.
Cowdenbeath were relegated from the first division at the end of that season and Nicholl is determined to avoid that fate this term. "Donald [Findlay, the club's chairman] has stressed the importance of staying in this league," said Nicholl, whose side are ninth in the SPFL Championship. "The last time I was here they got relegated and I don't like that."