Nutt came to the Woodlands on loan from Sedgley Park for two games last November 2007 and returned in February to make a further four appearances in the claret and gold.
Fylde won all six of these matches, scoring 235 points and conceding 70.
Nelson said: "I'm delighted that Steve has agreed to a permanent move to the Woodlands. We consider him a pivotal signing and he has been courted by other clubs.
"He is one of the best fly-halves in the North-West and has demonstrated his ability in a successful career at National One levels with Moseley, Waterloo and Sedgley Park.
"Fly-half is a crucial position and his partnership with scrum-half Craig Aikman has already been very exciting.
"He has had an outstanding County Championship campaign for Lancashire and is also a very competent goalkicker."
Other Fylde squad members who have committed themselves for the next campaign are Roger Banks, Nick King, Alan Holmes, Oliver Brennand, Dave Wilks, Martin Wallwork and Aikman.
Nelson is optimistic that record try-scoring winger Nick Royle will also sign up.
He is in talks with potential new signings who have expressed an interest in joining the club.