He also tapped Peter Navarro, an outspoken China critic, to head the White House National Trade Council, a new office that will oversee trade and industrial policy, in the latest sign he is moving ahead with plans to overhaul US economic policy.
The 80-year-old Icahn, known as an aggressive, activist investor, will not serve as a government employee, will receive no salary and will not be bound by ethics rules requiring him to divest his investments.
He said President Barack Obama had crippled America's business owners with what he says is more than $1 trillion in new regulations and over 750 billion hours dealing with paperwork. "It's time to break free of excessive regulation and let our entrepreneurs do what they do best: create jobs and support communities," he said.
Icahn is already reported to have helped Trump pick candidates to fill his cabinet, including a climate-change denier to head the Environmental Protection Agency.
"Carl was with me from the beginning and with his being one of the world's great businessmen, that was something I truly appreciated," Trump said in a statement.
"He is not only a brilliant negotiator, but also someone who is innately able to predict the future especially having to do with finances and economies," the real estate billionaire added. "His help on the strangling regulations that our country is faced with will be invaluable."
Trump's appointment of Narvarro signals he is also moving to reshape relations with China after having heightened rising tensions between the world's two largest economies with a series of snubs and criticisms.
A professor at the University of California, Irvine, Navarro's books include "Death by China," in which he criticizes Beijing for waging economic war by subsidizing its manufacturing industry and blocking American imports.
Trump's promise to return US manufacturing jobs that have moved abroad by cutting federal regulation and attacking what describes as unfair competition from China provided a central pillar of his campaign platform.
He described Navarro as "a visionary economist" in a statement, saying the brash investor would "develop trade policies that shrink our trade deficit, expand our growth and help stop the exodus of jobs from our shores."
Like many of Trump's picks for his future administration, both Navarro and Icahn are staunch loyalists of the divisive president-elect who have no experience in government.
Icahn is a New York City native like Trump. He began his career on Wall Street in 1961, and has held substantial or controlling stakes in numerous American companies over the years, including RJR Nabisco, Texaco, Philips Petroleum, Western Union, Gulf & Western, Viacom, Revlon, Time Warner, Motorola, Chesapeake Energy, Dell, Netflix, Apple and eBay.
He also owned the last glitzy Trump casino in Atlantic City, New Jersey, the Trump Taj Mahal, until it finally failed and closed last month after going through two bankruptcy reorganizations since it opened in 1990.
Icahn took over the casino in 2014, but said it had lost $350 million over just a few short years.