Trump said Powell would provide the type of leadership that would sustain economic progress.
"I am confident that with Jay as a wise steward of the Federal Reserve, it will have the leadership it needs in the years to come," the president said during his announcement in the Rose Garden.
If confirmed, Powell would replace Janet Yellen as chair of the U.S. central bank. Yellen has led the Fed since early 2014 and her 4-year term expires in February. For weeks, it's been unknown whether Trump would reappoint Yellen, nominated to the post by former President Barack Obama, to another term.
Powell, who has served on the Federal Reserve board under Yellen and former chair Ben Bernanke, said the two leaders guided the central bank with "insight and courage." He said he was "honored and humbled" by the nomination.
"If i am confirmed by the Senate, I will do everything within my power to achieve our congressionally assigned goals of stable prices and maximum employment," he said.
"In the Federal Reserve, we understand that monetary policy decisions matter for American families and communities. I strongly share that sense of mission and I'm committed to making decisions with objectivity based on the best available evidence in the longstanding tradition of monetary policy and independence."
Powell has served on the Fed board since 2012 and was the under secretary of the treasury for domestic finance during the administration of President George H. W. Bush. He earned his bachelor's degree from Princeton University and a juris doctor degree from Georgetown University.
Trump said he's hopeful for bipartisan support for his nominee.
"For each of his appointments to the Fed, the Senate confirmed Jay with strong support from members of both parties. I hope the Senate will swiftly confirm him once again.
"Jay has earned the respect and admiration of his colleagues for his expertise and judgment."
Trump's announcement Thursday is expected to have a significant impact on the U.S. markets. Wednesday, the Federal Reserve voted to leave key interest rates unchanged.