If confirmed by the U.S. Senate, Yellen would become vice chair of the board of governors of the Federal Reserve System, serving under chairman Ben Bernanke.
Obama also nominated two others to the board, saying in a prepared statement, "The depth of experience these individuals bring in economic and monetary policy, financial regulation, and consumer protection will make them tremendous assets at the Fed."
The other two nominees are Peter Diamond, a Massachusetts Institute of Tehcnology economist, and Maryland state banking regulator Sara Bloom Raskin.
Yellen issued a statement today saying that if confirmed, she looks forward to continuing to work for "policies that foster economic prosperity and ensure a stable financial system."
"I am strongly committed to pursuing the dual goals that Congress has assigned us: maximum employment and price stability, and, if confirmed, I will work to ensure that policy promotes job creation and keeps inflation in check," Yellen said.
The Federal Reserve, as the nation's central bank, develops monetary policy and regulates U.S. banking institutions. Its seven-member board, appointed by the president, serve 14-year terms. The chair and vice-chair have four-year terms.