On 7 October 2009, Grant returned to Portsmouth as their new Director of football, following the purchase of the club by Ali al-Faraj. On 26 November 2009, following the release of Paul Hart, Grant was confirmed as the new manager of the club. His first game as manager was a 4–1 defeat at home to Manchester United on 28 November 2009. This was followed by a 4–2 home defeat to Aston Villa in the League Cup. His first win with Pompey arrived in the Premier League on 5 December 2009, with a 2–0 win over Burnley Following this he led Portsmouth to a 2–0 win over Liverpool to bring his new side level on points at the foot of the table. Although Portsmouth went into administration in March 2010 and had nine points deducted as a result (contributing to their eventual relegation in bottom place), Grant oversaw a run to the FA Cup final which saw them narrowly beaten by his old club Chelsea at Wembley Stadium. On 20 May 2010, Grant resigned as the manager of Portsmouth. He announced his decision to leave in an open letter to fans on the club's website, stating that "it was the hardest decision I have ever had to make". He went on to say that Portsmouth's fans had brought tears to his eyes with their loyalty, devotion and passion for the club.