The five men were being prosecuted by US military commissions at Guantanamo, but the Obama administration has pledged to close the controversial prison and move some of the cases to US criminal courts for trial.
The transfer of detainees from Guantanamo to New York is not expected to happen for weeks since formal charges have not been filed against most of the men.
Holder also announced that Abd al-Rahim al-Nashiri, a suspect in the bombing of the USS Cole in Yemen in 2000, would face a military commission, along with four other Guantanamo detainees.
Khalid Sheikh Mohammed allegedly proposed the idea of the attacks, obtained funding, oversaw the operation and trained the hijackers.
Waleed bin Attash, a Yemeni, allegedly ran an al-Qaeda training camp in Afghanistan, where two of the 19 hijackers were trained.
Ramzi Binalshibh, a Yemeni, allegedly helped find flight schools for the hijackers, helped them enter the US and assisted with financing the operation.
Ali Abd al-Aziz Ali, born in Pakistan and raised in Kuwait, allegedly helped nine of the hijackers travel to the US and sent them $120,000 for expenses and flight training.
Mustafa Ahmad al-Hawsawi, a Saudi, allegedly helped the hijackers with money, clothing, traveller's cheques and credit cards.
"... I have decided to refer back to the department of defence five defendants to face military commission trials including the detainee who was previously charged in the USS Cole bombing," Holder said.
"For over 200 years, our nation has relied upon a faithful adherence to the rule of law," he said. "Once again, we will ask our legal system in two venues to answer that call."
Speaking before Holder's announcement, Barack Obama, the US president, had said the New York trials were a legal and national security matter.
"I am absolutely convinced that Khalid Sheikh Mohammed will be subjected to the most exacting demands of justice," he said.
The New York case may force the court system to confront a number of legal issues surrounding counterterrorism programmes begun after the 2001 attacks, including the harsh interrogation techniques once used on some of the suspects while in CIA custody.
One of the most controversial methods, waterboarding, or simulated drowning, was purportedly used on Mohammed 183 times in 2003, before the practice was banned.
Al Jazeera's Patty Culhane, reporting from Washington DC, said: "There are many people that believe we only know a tiny bit of what has happened to these detainees during interrogations.
"Waterboarding was hugely controversial ... and President Obama has flat out called it torture and said it will not be used again.
"When the defence has its turn in the New York City courtroom, it will be able to spell out everything that has been done to these detainees ... and if torture has been involved, and the president has called it torture, any evidence would probably be inadmissible."
But Holder, citing information he said had not yet been made public, asserted that the harsh techniques used against the defendants would not prevent a "successful" outcome to the trials.
Mohammed apparently admitted to interrogators that he organised the attacks, allegedly proposing the concept to Osama bin Laden, the al-Qaeda leader, as early as 1996, obtaining funding for the attacks, overseeing the operation and training the hijackers in Afghanistan and Pakistan.
Mohammed and the four other detainees - Waleed bin Attash, Ramzi Binalshibh, Mustafa Ahmad al-Hawsawi and Ali Abd al-Aziz Ali - all face charges relating to the orchestrating of the attacks that killed 2,973 people.
|Holder said he was confident evidence gained by interrogation could be used in court [AFP]
The accusations against the other men include the running of an al-Qaeda training camp where two of the 19 hijackers were trained, financing of the operation, and assisting the hijackers with clothes and other expenses.
Major Jon Jackson, the military attorney for Mustafa Ahmed Al-Hawsawi, welcomed the decision to switch to civilian trials for the five September 11 defendants.
"There should not be a lesser standard of justice based on the alleged crime that you commit. The military commissions were affording a lesser form of justice for those that were involved in them," he told Al Jazeera from Las Vegas.
Mohammed already has an outstanding indictment against him in New York over an alleged unsuccessful plot called Bojinka to simultaneously take down multiple aircraft over the Pacific Ocean in the 1990s.
The attorney-general's decision in these cases comes just before Monday's deadline for the government to decide how to proceed against 10 detainees facing military commissions.
Some members of the US congress have opposed efforts to bring Guantanamo Bay detainees to trial in the US, saying it would be too dangerous.
The Obama administration has defended the planned trials, saying many "terrorists" have been safely tried, convicted, and imprisoned, including the 1993 World Trade Centre bomber, Ramzi Yousef.
But an organisation that represents the victims of the September 11 attacks said Friday's decision was "a terrible mistake".
"To allow a terrorist and a war criminal the opportunity of having US constitutional protections is a wrong thing to do and it's never been done before," Ed Kowalski of the 9/11 Families for a Secure America Foundation said.