As a US envoy, Richardson has led talks in North Korea, Iraq, Cuba, Myanmar and Sudan, where he helped negotiate the release of a US journalist jailed in Sudan over his Darfur reporting in 2006.
Richardson also sought the Democratic presidential nomination earlier this year, but eventually dropped out and became one of the first in the party to endorse Obama for president.
The commerce secretary is seen as the voice of the US business community in the White House and is tasked with promoting US business interests overseas.
Richardson's new post could take him to China, Russia, India and Brazil at the head of trade missions to open new markets for US goods and services.
But analysts say it has become secondary to the treasury department in terms of domestic economic policy and international trade matters.
The nomination must be confirmed by the US senate.
On Monday, Obama also announced his foreign and national security team, led by Hillary Clinton as secretary of state and Robert Gates, the Republican current defence secretary, who will remain in the role.
He has already named his economic team, led by Timothy Geithner as treasury secretary.