The United States would work closely with African allies to choose a location for the new command in Africa, he said.
"This new command will strengthen our security cooperation with Africa and create new opportunities to bolster the capabilities of our partners in Africa," Bush said.
"Africa Command will enhance our efforts to bring peace and security to the people of Africa and promote our common goals of development, health, education, democracy and economic growth in Africa."
'Following the oil'
Bush's decision comes as Washington grows increasingly concerned about growing "Islamist militancy" in parts of Africa.
The US is also concerned at Chinese attempts to gain greater control over the continent's natural resources.
Djibouti - More than 1,500 US troops have been based in Camp Lemonier, in Djibouti, a tiny Horn of Africa nation since 2002. In 2006 the military said it would expand Camp Lemonier from its present 88 acres to more than 600. Djibouti is the centre of US operations in the Horn of Africa.
Ethiopia - US troops and diplomats are believed have worked closely with the Ethiopian army which recently helped the Somali government defeat the Islamic Courts Union in early 2007.
Egypt - The US supplies the Egyptian army with over $1 billion of military equipment annually. Two US battalions are also stationed in Egypt's Sinai peninsula as a part of a peace agreement between Egypt and Israel.
Somaliland - In 2005 a detachment of US troops reportedly landed in Somaliland, a break-away region of Somalia, to search for members of Al-Qaeda.
Elsewhere in Africa - US troops have also helped train anti-terrorism forces of Algeria, Chad, Kenya, Mali, Mauritania, Niger, Nigeria, Tanzania and Uganda amongst others.
Hu Jintao, the Chinese president has been on a seven country tour of the continent, during which he has pledged to write off $70 million worth of Sudanese debt.
Josh Rushing, Al Jazeera's military analyst, told the Inside Story programme that Africa Command came down to simply "following the oil".
Meanwhile on the same programme Salim Lone an international affairs analyst and a former UN spokesman, lamented the planned US military intervention.
"Finally an engagement has been made with Africa but a military one," he said.
Referring to the growing Chinese presence in the continetn, Lone said: "If the Chinese giving aid [to Africa] is 'colonisation' then what is Africa Command?"
However Gates said that the creation of Africom would allow the US to focus it's resources more closely on Africa.
"This command will enable us to have a more effective and integrated approach than the current arrangement of dividing Africa between Central Command and European Command - an outdated arrangement left over from the Cold War," Gates told the US Senate's armed services committee.
At present, the US military's deployments to Africa are handled by Central Command, which handles the Middle East and Horn of Africa, European Command which covers northern Africa and Pacific Command which has responsibility for Madagascar and some smaller islands.
The commands are unified, meaning they control assets from different armed services.
Involvement in Africa
The US is already extensively involved in Africa, working closely with several Arab nations in north Africa as well as with other countries further south.
The US army began working in west and central Africa in 2002, teaching local armies basic techniques to help them locate and destroy militant groups in the region.
|"If the Chinese giving aid is 'colonisation' then what is Africa Command?"|
US forces also carried out at least two air strikes in Somalia last month, targeting al-Qaeda fighters.
Al-Qaeda carried out near simultaneous car bombings at the US embassies in Nairobi, Kenya, and Dar es Salaam, Tanzania, in 1998, killing more than 250 people.
The US, the world's biggest energy consumer, also hopes the Gulf of Guinea region in West Africa will provide up to a quarter of its oil imports within a decade.
Bryan Whitman, a Pentagon spokesman, said that Pentagon officials would flesh out plans for the new command at a briefing on Wednesday.