The choice of Haley was announced in a statement on Wednesday (Nov. 23) from Trumps transition team.
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 an our country," the Republican president-elect said in the statement.
Haley, a 44-year-old Republican, sharply criticized Trump during the presidential campaign over his harsh rhetoric about illegal immigrants and for not speaking forcefully enough against white supremacists.
The choice of Haley, a daughter of Indian immigrants who is an active voice for tolerance, may be aimed at countering criticism of Trumps divisive comments about immigrants and orities, as well as accusations of sexism during his campaign for the Nov. 8 election in which he defeated Democrat Hillary Clinton.
Haley led an effort last year to remove the Confederate flag from the grounds of the South Carolina state capitol after the killing of nine black churchgoers in Charleston. The flag was carried by pro-slavery Confederate forces during the U.S. Civill War and is viewed by many as a racist emblem, Reuters reported.
She condemned Trump during the Republican presidential primary campaign for not disavowing the support of white supremacist group Ku Klux Klan and one of its former leaders, David Duke.
In her rebuttal to President Barack Obamas State of the Union address in January, Haley called for tolerance on immigration and civility in politics in what some saw as a rebuke of Trump.
"During anxious times, it can be tempting to follow the siren call of the angriest voices," she said. "We must resist that temptation."
In the early days of the primary contest to pick this years Republican presidential nominee primary, Haley was mentioned as a possible vice presidential pick.
She supported Trump rivals Marco Rubio and Ted Cruz, both U.S. senators, in the primary before saying last month she would vote for Trump despite reservations about his character. Trump is due to succeed Obama, a Democrat, on Jan. 20.
Haley also criticized Trump for not releasing his tax returns, prompting the New York real estate mogul to hit back on Twitter, "The people of South Carolina are embarrassed of Nikki Haley!"
Haley, a state lawmaker before becoming governor, has little experience in foreign relations.
According to the Post and Courier of Charleston, her international experience involves negotiating development deals with international companies who want to work in South Carolina.
She has led seven overseas trade missions as governor, it supported.
"She is also a proven dealmaker, and we look to be making plenty of deals. She will be a great leader representing us on the world stage," Trump said in the statement announcing his appointment.
Haleys husband, Michael, was deployed for nearly a year in Afghanistan with the South Carolina National Guard in 2013, said the Post and Courier, which first reported Haley had been picked for the job.
Haley would succeed Obamas U.N. envoy, Samantha Power, in the high-profile position.
The United States is one of five permanent veto-powers on the 15 member U.N. Security Council, along with Russia, China, France and Britain.
Haley will be working with a new U.N. secretary-general after the United Nations General Assembly appointed former Portuguese Prime Minister Antonio Guterres in October for a five-year term beginning Jan. 1, 2017.
He will replace Ban Ki-moon of South Korea.
Washington is the largest funder of the 193-member United Nations, paying more than a quarter of the $8 billion
peacekeeping budget and 22 percent of the several billion dollar regular budget.