The jobless rate fell from 8.9 percent to 8.8 percent on the addition of 216,000 jobs.
Austan Goolsbee, chairman of the White House Council of Economic Advisers, said the 1 percentage point drop in the unemployment rate from 9.8 percent to 8.8 percent over the past four months is "the largest such decline since 1984, and, importantly, it has been driven primarily by increased employment, rather than people leaving the labor force."
"The payroll tax cut and business incentives for investment are creating the conditions for sustained growth and job creation," Goolsbee said.
The Labor Department said the number of people out of work fell from 13.7 million to 13.5 million.
The bureau said the manufacturing sector added 17,000 jobs in March after adding 33,000 jobs in February. The gain in March for the sector included 8,000 new jobs in metal fabrication and 5,000 in machinery manufacturing.
Mining added 14,000 jobs in March, while healthcare added 37,000 jobs after adding 34,000 in February. March also added 37,000 jobs in the hospitality industry.
Service work saw an increase of 78,000 professional and business service jobs and 35,000 new technical positions.
Temporary work, a major portion of new jobs at the beginning of the recovery, have become less of a factor with only 29,000 new temporary jobs added to the economy in March.
The Labor Department said average hourly earnings were unchanged in the month, holding at $22.87 per hour. Earnings for private sector production and non-supervisory positions actually fell in the month by 2 cents to an average of $19.30 per hour.
Growth in the U.S. labor market appears to be gaining strength, economists said ahead of the figures.
"The labor market recovery is gathering momentum," Ian Shepherdson, chief U.S. economist of the economic analysis firm High Frequency Economics, told MarketWatch.
Using other gauges, unemployment, as measured by the Gallup Organization without seasonal adjustment, was 10 percent in March, down from 10.2 percent in mid-March and from 10.3 percent at the end of February, but above the end-of-January's 9.8 percent.
This compares with Gallup's unemployment measure of 10.4 percent a year ago.
Gallup's figures are based on phone interviews with 17,811 U.S. adults Feb. 28-March 29. The maximum margin of sampling error is 1 percentage point.
Business outsourcing firm Automatic Data Processing Inc. reported Wednesday U.S. private-sector jobs in March increased 201,000, down from February's 208,000 but up from January's 187,000.
At the same time, outplacement consulting firm Challenger Gray & Christmas Inc. said March U.S. layoffs were down 39 percent from last year at this time and down 18 percent from February.
"All of this is consistent with Gallup's Job Creation Index, which has shown slightly more jobs being created and comparatively low layoffs during the first quarter of 2011," Gallup said.