President Bush said at the White House, flanked by Bernanke and Greenspan, "The decisions of the Fed affects the lives and livelihood of all Americans."
President Bush added his choice "commands deep respect in the financial community."
Bernanke, 51, is a former Federal Reserve board member and chairman of the Princeton economics department.
Although Bernanke and Greenspan differ on whether the Fed should set targets for inflation -- Bernanke thinks it should, Greenspan does not -- experts do not expect the change to dramatically affect the economic philosophy of the central bank. While he was on the Fed board, market observers often looked at Bernanke's speeches for insight into Greenspan's thinking, the Associated Press reported.
The early appointment gives the Senate over three months to confirm Bernanke before Greenspan's term expires January 31.
"If I am confirmed by the Senate I will do everything in my power, in collaboration with by Fed colleagues to help assure the continued prosperity and stability of the American economy," said Bernanke, a Harvard educated economist.
"My first priority will be to maintain continuing with the policy and policy strategies under the Greenspan era," Bernanke added.
Bernanke is known as a straight-talking Republican economist who does not espouse any overriding ideology. He has served as the chairman of the President's Council of Economic Advisers since June 2005.
A graduate of Harvard University, he received his doctorate from the Massachusetts Institute of Technology in 1979.
"Economics is a very difficult subject," Bernanke once said. "I've compared it to trying to learn how to repair a car when the engine is running."
If confirmed, Bernanke faces a challenging economic situation with high gas prices and rising inflation. As chairman of the Fed board, he only has one vote on the 12-member Federal Open Market Committee, but he has great influence among the Fed board members and regional bank presidents who make up the panel that meets eight times a year to set interest rates.
Alan Greenspan, who some in Washington refer to as an economic rock star, was selected as Fed chairman by Ronald Reagan in 1987. He was re-nominated by the senior George Bush and won two more selections for four-year terms by Bill Clinton.
"Part of what has caused Greenspan to have a great run is the fact that at this point everyone -- such a large percentage of the U.S. populous is involved in the stock market that at this point his decisions affect everyone, every household nearly, when in the old days, particularly under some of the older Fed Chairmen back in the old days, such as William McChesney Martin, there was such a small number of people invested that the decisions that were made had a less of an effect on Greenspan. That has led to Greenspan having an almost cult like status," explained Fortune Magazine reporter Justin Martin in a Dec. 2000 NewsHour interview.