The selection signalled a fresh attempt by Obama to make good on his promise to pay attention to the US economy and jobs with Americans deeply dissatisfied with his handling of these issues.
Krueger, an expert on unemployment who has argued that raising the minimum wage may help employment rates, would succeed Austan Goolsbee as chairman of the White Home Council of Economic Advisers.
With Krueger at his side in the Whitened House Rose Garden, Obama said he would rely on the economist for "unvarnished recommendations" how to bring down the 9. 1% jobless rate and restore growth towards the struggling US economy.
Obama described creating jobs as an urgent challenge and said he'll outline a plan next week to put more money in Americans' pockets and obtain construction crews working.
"Next week I will be laying out a number of steps that Congress can take immediately to put more money in the actual pockets of working families and middle class families, to make it easier for smaller businesses to hire people, to put construction crews to work rebuilding our country's roads and railways and airports, " he said.
Obama is expected to propose an extension of a payroll tax reduce and seek money for infrastructure improvements such as repairing bridges and roads in an effort to get Americans working.
White House spokesman Jay Carney said the president was still focusing on the plan and a day for its release had not yet already been decided.
Republicans in Congress have taken a dim view of new obama's stimulus spending, which means Obama could have trouble gaining bipartisan support for their plan.
"My hope and expectation is that we can put country before party and obtain something done for the American people, " Obama said.
LABOUR EXPERTISE
Obama's open public approval ratings have fallen to around 43%, close to the lows associated with his presidency, amid anxiety over unemployment and lacklustre economic growth, as he prepares to ask Americans for any second term in 2012.
Krueger's expertise in labour-market issues is in preserving the administration's efforts to underscore a focus on jobs, but he has additionally done work on the economics of education, inequality and what breeds terrorism.
Goolsbee, among Obama's longest-serving advisers, left the administration earlier this month to return to his teaching job in the University of Chicago. The departure was a blow for the White House because Goolsbee have been a high-profile spokesman on the economy.
"Alan understands the difficult challenges the country faces, and I have confidence that he will help us meet those challenges among the leaders on my economic team, " Obama said.
Krueger served in the Federal government as a Treasury Department economist but left that job to return in order to Princeton last fall.
The nomination requires Senate confirmation but Krueger has a benefit because he has gone through the confirmation process before for his Treasury work. Carney said the White House was optimistic he would get a fast confirmation.
At Treasury, Krueger was assistant secretary for economic policy and main economist. He is also a veteran of President Bill Clinton's administration, serving as chief economist for that Department of Labor from August 1994 to August 1995.
Krueger holds the Bachelor of Science degree in industrial and labour relations from Cornell College. He earned his PhD in economics at Harvard University.
While at Princeton, Krueger was a normal contributor to the Economic Scene column in The New York Times.
Krueger has written extensively on unemployment and also the effects of education on the labour market.
If confirmed as CEA chairman, Krueger will be the third person to hold that post under Obama. Obama's first CEA chairman, Christina Romer, left the post last year to return to the University of California, Berkeley.