Powell says Barack Obama has the ability to transform America and American politics.
"He has met the standard of being a successful president, being an exceptional president. I think he is a transformational figure. He is a new generation coming onto the world stage, onto the American stage. And for that reason, I will be voting for Senator Barack Obama," he said.
It was an important high-profile endorsement for Obama from a fellow African-American who served first as the nation's top military officer and later as its chief diplomat.
Powell, a retired general, was the secretary of state during President George W. Bush's first term. And while he has never held a prominent political post, he has served in several Republican administrations.
Appearing on NBC's Meet the Press, Powell said both Barack Obama and his opponent, Republican John McCain, could handle the job of commander-in-chief. But he indicated he believes Obama would be better able to tackle the nation's economic problems and improve its standing abroad.
"I think the number one issue the [new] president is going to have to deal with is the economy - that is what the American people are worried about," added Powell. "And frankly, it is not just an American problem, it is an international problem."
Powell said he has been friends with John McCain for many years. But he said he is disappointed in the tone of the McCain campaign, and the choice of Sarah Palin as the Republican vice-presidential nominee.
He was asked if race played a role in his decision to back Senator Obama.
"If I had only that in mind, I could have done this six, eight, ten months ago. I really have been going back and forth between somebody I have the highest respect regard for - John McCain - and somebody I was getting to know, Barack Obama," added Powell. "And it was only in the last couple of months that I settled on this."
Senator McCain downplayed the Powell announcement when asked about it on the Fox News Sunday television program.
"I have always admired and respected General Powell. We are long time friends. This does not come as a surprise. And I am also very pleased to have the endorsement of four former secretaries of state - Secretaries Baker, Kissinger, Eagleburger and Haig," he said.
With just over two weeks left until Election Day, nationwide polls put Obama in the lead. But the race is tightening, and John McCain says he is still confident of victory.
"I have been on enough campaigns, my friend, to sense enthusiasm and momentum and we have got it," said McCain.
For his part, Senator Obama is warning his supporters against being overconfident. He is spending his weekend campaigning in states that are usually strong for Republicans - such as North Carolina and Missouri.