Kushner, who is married to Ivanka Trump, is a property developer with a wide range of business interests. He had played a key role in the presidential campaign and his new White House job will cover both domestic and foreign policy.
"Kushner has been a tremendous asset and trusted advisor throughout the campaign and transition and I am proud to have him in a key leadership role in my administration," Trump said in a statement ahead of his inauguration on January 20.
"Kushner has chosen to forego his salary while serving in the administration," the Presidential Transition Team said in a statement.
The incoming White House Chief of Staff Reince Priebus said that Kushner is "a visionary with a rare ability" to communicate with and assemble broad coalitions of support.
More From This Section
"His entrepreneurial mindset will be a great asset to the team as well as his open mind, adaptability and keen intellect," he said.
"It is an honour to serve our country. I am energised by the shared passion of the President-elect and the American people and I am humbled by the opportunity to join this very talented team," Kushner said.
Kushner's appointment would put him in position to exert broad sway over both domestic and foreign policy, particularly Middle East issues and trade negotiations.
Kushner plans to resign from the management positions he holds at his companies, including as CEO of Kushner Companies, publisher of The Observer and positions with other organisations, and will divest from a "significant number" of his assets to comply with government ethics rules, Kushner's attorney Jamie Gorelick said.
"I'll let President-elect Trump select whomever he would like to have around him. Obviously that's what he will do. What I can tell you is that President Obama and all of those of us who served on his senior staff here in the White House went to great lengths to comply with the strict ethical requirements that the American people expect of people who are entrusted with so much authority," said White House Press Secretary Josh Earnest.
Meanwhile, members of the House Judiciary Committee urged the Department of Justice and the Office of Government Ethics to step in.