At the nomination ceremony, President Sheikh Sharif Sheikh Ahmed said: "I hope the prime minister designate will do his duties in a very honest and transparent manner by completing the peace process and forming an inclusive national unity government."
Parliament is expected to ratify Sharmarke on Saturday.
The decision drew wide approval among many Somalis but condemnation by local fighters.
"We welcome him," said Sheikh Abdiqadir Ali, a clan elder in in Puntland region where Sharmarke is from. "He was not involved in Somali politics and we are sure he will bring peace."
But Sheikh Hassan Yucqub, a spokesman for al-Shabaab group, which is fighting Ahmed's government, mocked the decision, saying: "An unlawful camel never gives birth to lawful ones."
Washington says al-Shabab is al-Qaeda's proxy in Somalia, and the group is known to have foreign fighters in its ranks.
Ahmed has vowed to hold talks with al-Shabab. "I believe the best way to approach them is dialogue and trying to convince each other," Ahmed told Al Jazeera recently in an interview.
Underlining the challenge awaiting Sharmarke and Ahmed, an al-Qaeda leader urged jihad against the new government.
"Aim your arrows towards them ... direct your battles against them and intensify your campaign," Abu Yahya al-Libi said in a video released on Islamist websites on Friday.
Sharmarke has held various UN posts including as a political adviser on the Darfur conflict.
He is the son of Abdirashid Ali Sharmarke, an elected president shot dead in 1969 before a military coup.
Though his family base is Virginia in the US, Sharmarke has both Canadian and Somali citizenship, his aides said.