"I have decided to put forward the candidacy of Viktor Yanukovych for the post of prime minister," Mr Yushchenko said on national television.
"We have a good chance to escape the political war and pass to political competition," he said.
A midnight deadline had passed without word from the pro-Western leader on how he would end the looming crisis over the formation of a new government.
Under the constitution, the President’s failure to make a nomination within 15 days would require that he dissolve parliament and call new elections.
Pact to be signed
A pact agreed with Mr Yanukovych's pro-Russian Regions party would be signed shortly and would ensure that the country stayed on its current pro-Western course, the President said.
"Concerning the principles determining Ukraine's domestic and foreign policy, its continuity, we have made a full stop today. I am sure that there will be no more discussions," he said.
Mr Yanukovych was defeated in the 2004 uprising but enjoyed a comeback at elections in March, with Regions winning the most seats.
The announcement came after weeks of tortuous negotiations among the parties elected at March 26 parliamentary elections.
Mr Yanukovych's Regions party won the most seats at the election, picking up support in the pro-Russian east of the country.
It opposed Mr Yushchenko's plans for Ukraine to join the North Atlantic Treaty Organisation.
But it failed to gain an overall majority.
As coalition talks got under way, Mr Yushchenko sought to win guarantees that Mr Yanukovych would not drop the pro-Western principles of the 2004 popular uprising known as the "orange revolution".