"Governor Haley has a proven track record of bringing people together regardless of background or party affiliation to move critical policies forward for the betterment of her state and our country," Trump said, referring to his former critic with whom he had sparred bitterly during the campaign.
44-year-old daughter of Indian immigrants from Punjab, Haley is the first woman tapped by Trump for a top-level administration post during his transition to the White House.
The presidential transition team said this would a cabinet-level position in the Trump-Pence Administration.
The cabinet position would require confirmation by the Senate. If confirmed by the Senate, Haley would be the first Indian-American to be appointed to a cabinet-level position in any presidential administration.
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"Our country faces enormous challenges here at home and internationally, and I am honored that the President-elect has asked me to join his team and serve the country we love as the next Ambassador to the United Nations," Haley said, commenting on her nomination to the key post.
As governor, she has led seven overseas trade missions and successfully attracted jobs and investment through negotiations with foreign companies, it said.
One of her trade missions was to India.
Trump's plan to offer the job to Haley, a rising Republican star, was first reported by the Post and Courier.
Haley, currently the youngest governor in the country, has already carved out a legacy for herself, serving as her home state's first female and first minority governor.
Trump met with Haley on Thursday at Trump Tower in New York as part of the round of meetings the president-elect has held.
With her appointment to the top diplomatic post in UN, Haley has become the first woman and minority to join Trump's administration. She would replace Samantha Power.
Born Nimrata "Nikki" Randhawa, Haley is the first
minority and female governor of South Carolina, a deeply conservative state with a long history of racial strife.
A true fiscal conservative and savvy businesswoman, Haley's leadership drove down South Carolina's unemployment to a 15 year low by adding more than 82,000 jobs in each of South Carolina's 46 counties, the transition team said.
Prior to dedicating her life to public service, Haley worked at her family business.
In 1998, Haley was named to the board of directors of the Orangeburg County Chamber of Commerce and named to the board of directors of the Lexington Chamber of Commerce in 2003. She also became treasurer of the National Association of Women Business Owners in 2003 and president in 2004.
Haley and her husband, Michael, a Captain in the Army National Guard and combat veteran who was deployed to Afghanistan's Helmand Province, have two children, Rena, 18, and Nalin, 15.