Yellen chaired the Federal Reserve from 2014 to 2018 after four years as the central bank's vice chair.
Like most new members tapped, she is well-regarded among different political party factions.
"As we get to work to control the virus, this is the team that will deliver immediate economic relief for the American people during this economic crisis and help us build back better than ever," Biden said in prepared remarks.
"They will work tirelessly to ensure every American enjoys a fair return for their work and an equal chance to get ahead, and that our businesses can thrive and outcompete the rest of the world."
Similar to other picks, Yellen also brings more diverse representation to the cabinet posts.
If confirmed by the Senate, Yellen would be the first woman to lead the Treasury in the department's 231-year history.
Biden also nominated Wally Adeyemo to serve as deputy treasury secretary. Adeyemo served as National Economic Council deputy director and deputy national security adviser under President Barack Obama.
If confirmed, Adeyemo would be the first Black deputy treasury secretary.
Another pick was Cecilia Rouse, dean of Princeton School of Public and International Affairs, to serve as chair of the White House Council of Economic Advisers.
Rouse previously served as a member of the Obama White House Council of Economic Advisers. If confirmed, Rouse would become the first Black chair.
Biden also tapped for the council his chief economist when he was vice president, Jared Bernstein, along with Heather Boushey, co-founder of the progressive Washington Center for Equitable Growth.
The president-elect also nominated Neera Tanden, president of the liberal think tank Center For American Progress, as White House Office of Management and Budget director, who may have trouble in confirmation with some opposition from Republicans and progressives.
Sen. John Cornyn, R-Texas, said Tanden "stands zero chance of being confirmed."
Briahna Joy Gray, the former press secretary for Sen. Bernie Sanders presidential campaign, also denounced the pick.
"Neera Tanden supports cuts to the social safety net, which, like a Republican, she refers to as 'entitlements," Gray tweeted.
If confirmed, Tanden would be the first women of color and South Asian American in the post.