Usually all-star coaching duties fall to the leaders of the teams with the best record at the end of January, but the Los Angeles Lakers' Phil Jackson and the Cleveland Cavaliers' Mike Brown are ineligible this year because they were the all-star coaches in 2009.
The Nuggets are 31-14 this season and have secured at least an end-of-January tie for the second-best record behind the Lakers (35-11).
Dallas (30-16) could tie Denver's mark but Karl was tabbed because Mavericks Coach Rick Carlisle more recently coached an all-star team. Carlisle led the East in the 2004 All-Star Game. Karl last coached all-stars in 1998. He also coached the West in 1994 and 1996.
The East's coach won't be determined until the Sunday. Boston's Doc Rivers (29-14 record), Atlanta's Mike Woodson (29-15) and Orlando's Stan Gundy (30-16) are in the running.
The 2010 NBA All-Star Game is scheduled for Feb. 14 in Dallas.