Nicholson joined the Grecians from Derby in October but he will now become head coach for the newly-promoted Bluebirds' Under-17 to Under-21 age groups as well as managing their Under-18s.
And while he admitted he is relishing the chance of working in the top flight, Nicholson admitted it will be difficult to leave the League Two side.
"I'm delighted to have been given the opportunity to join a club the size of Cardiff City and to take on a very important role within their Academy," he told the club's official website.
"I've thoroughly enjoyed my time at Exeter City - it's a wonderful club, full of excellent people. It's been a valuable experience for me and one in which I've learnt a lot.
"I'm also sad to be leaving, because I've built up very good relationships with everyone at the club, including Steve Perryman and Paul Tisdale.
"Exeter took a chance on me back in October, when there was no other club prepared to do so at that time."