"His tenacity, broad experience and deep understanding of geopolitics make him (Tillerson) an excellent choice for Secretary of State," Trump said in the statement.
Like Trump, Tillerson, 64, has no formal foreign policy experience, but has built close relationships with many world leaders by closing massive deals across Eurasia and the Middle East on behalf of the world's largest energy company.
Trump has called Tillerson a "world-class player" and the transition team is likely to stress that his mastery of complex negotiations and knowledge of geopolitical factors shaping the oil industry are directly relevant to heading US diplomacy and managing the State Department.
Tillerson was recommended to Trump by former secretaries of state Condoleezza Rice and James Baker and former Secretary of Defence Bob Gates, CNN quoted sources as saying.
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Tillerson's nomination could face intense scrutiny in the Senate, considering his years of work in Russia and the Middle East on behalf of the multinational petroleum company.
Tillerson is considered one of the faces of Big Oil globally.
In 2011, Exxon signed a deal with Russian oil giant Rosneft to provide access to oil resources in the Arctic.
Rosneft's largest shareholder is the Russian government. Putin attended the Exxon signing ceremony and later awarded Tillerson the country's Order of Friendship.