Trump has stoked alarm among Democrats and fellow Republicans ahead of his January 20 inauguration by calling for closer ties with Moscow
The nomination, which capped weeks of debate about the right candidate, was the most keenly awaited in Trump's cabinet as the world waits to see how the incoming Republican president intends to alter US foreign policy.
Trump has stoked alarm among Democrats and fellow Republicans ahead of his January 20 inauguration by calling for closer ties with Moscow, in contrast to received wisdom in Washington that Russia remains a global security threat.
That sentiment -- coupled with the fact that Trump is at loggerheads with some Republican senators over a CIA assessment that Russian hackers helped him win the election -- may complicate Tillerson's confirmation hearings.
Trump, who announced the nomination early Tuesday, hailed Tillerson as a "great diplomat" and "one of the greatest and most skilled global business leaders of our time" at a campaign-style rally Tuesday night in the traditionally Democratic-leaning state of Wisconsin that helped elect him.
The 64-year-old Texan, who has no experience in government and spent his entire career at Exxon, "has the insights and talents necessary to help reverse years of foreign policy blunders and disasters," Trump told the crowd.
But politicians on both sides of the aisle have expressed concerns over Tillerson's ties to Russia. The businessman was awarded Russia's Order of Friendship by Vladimir Putin in 2013 and has publicly opposed sanctions on Moscow that thwarted his attempt to pursue huge oil deals in the Russian Arctic.
The Kremlin welcomed his nomination with an aide praising him as a "very solid figure" with whom Putin and Russians have "good, business-like relations."
"Rex is friendly with many of the leaders in the world that we don't get along with and some people don't like that," Trump told the crowd in West Allis, without mentioning Russia or Putin.
"They don't want him to be friendly. That's why I'm doing the deal with Rex, because I like what this is all about," he added.
"We need a new direction," said Trump. "Instead of jumping recklessly from one intervention to another, my administration will build a long term strategy for stability, prosperity, peace, and rebuilding our own country."
A series of establishment Republicans, including former secretaries of state Condoleezza Rice and James Baker, and former defense secretaries Donald Rumsfeld and Robert Gates have lined up to praise Tillerson.
Tillerson joined ExxonMobil in 1975 as an engineer, before rising to become president and chief executive, overseeing business activities in more than 50 countries. Appointed CEO in 2006, he had been due to retire in March.
But his lack of formal policy and government experience, and embedded relationship with a hugely powerful energy company is bound to result in sharp questions in the Senate confirmation hearings.
Senior Republican Senator John McCain has called Tillerson's ties to Putin "a matter of concern."
"Vladimir Putin is a thug, bully and a murderer, and anybody else who describes him as anything else is lying," McCain has said.
Senator Marco Rubio, a former Trump rival for the Republican White House nomination, tweeted: "Being a 'friend of Vladimir' is not an attribute I am hoping for from a #SecretaryofState."
McCain and other senators have backed a congressional probe into intelligence assessments on Russian election interference, putting top Republicans on a collision course with Trump, who dismissed the reports as "ridiculous".
If confirmed, Tillerson will face the hugely sensitive job of representing overseas a president apparently intent on trashing protocol and upending relationships built on decades of delicate diplomacy.
Beyond thorny ties with Russia, Sino-US relations are strained after a series of moves by Trump that provoked China, the world's second-largest economy, and controversy is also rife over his global business empire.
Trump postponed a press conference originally set for Thursday at which he was to unveil plans for separating himself from his global business dealings, instead writing on Twitter that his adult sons would manage the company.
The 70-year-old billionaire is now putting the finishing touches to his cabinet with former Texas governor Rick Perry and Montana Representative Ryan Zinke his reported picks for energy and interior secretary respectively.
On Tuesday he greeted a stream of guests in New York including rapper Kanye West and Bill Gates, the richest man on the planet who dedicates his life to philanthropy. Gates said Trump had an opportunity to inspire Americans to embrace innovation as John F. Kennedy once promoted space exploration.
"We had a good conversation about innovation, how it can help in health, education, the impact of foreign aid and energy, and a wide-ranging conversation about power of innovation," Gates said afterward.
Trump told the Wisconsin rally he also met Tuesday with Vogue editor-in-chief Anna Wintour, who was a vocal supporter of his Democratic rival Hillary Clinton.
He praised Republican House Speaker Paul Ryan, with whom he had a combative relationship during the campaign.
"Honestly, he is like a fine wine," he said to laughter. "Every day goes by I get to appreciate his genius more and more."