He will replace long-time Prime Minister and close ally Recep Tayyip Erdogan who earlier this month won Turkey's presidential election after serving a maximum of three terms as prime minister.
Davutoglu was the anticipated successor to Erdogan, and his appointment is regarded as a continuation of Erdogan's rule.
Erdogan announced the party's nomination, asserting that Davutoglu's selection was broadly supported. "We have consulted with everyone from the people on the street to the highest bodies of our party... We have come to a point of peace and brotherhood, and the unity of this movement is about everything," said Erdogan, adding "Those who want to sow seeds of discord will not succeed."
The AKP will convene a congress on August 27, where Davutoglu's nomination is expected to be confirmed.
Davutoglu was foreign minister since 2009 and previously was an adviser to Erdogan. He will assume the position of premier after his nomination is confirmed next week.