"With a record of service that has spanned more than 30 years as a public servant, as an adviser, as a scholar, Ash is rightly regarded as one of our nation's foremost national security leaders," Obama said.
If confirmed by the Senate, Carter will replace former Republican former Sen. Chuck Hagel, who is stepping down.
Carter was deputy secretary from 2011 to 2013.
"I think it's fair to say that, Ash, at your one year attempt at retirement from public service, you failed miserably. But I am deeply grateful that you're willing to go back at it," Obama said.
A Rhodes scholar, Carter is a trained physicist and weapons expert. The president praised him as "one of the few people who actually understand how many of our defense systems work."
Before announcing Carter's nomination, Obama touted the better-than-expected jobs number released Friday morning.
—Reuters contributed to this report.