Powell, a moderate Republican, urged his party Sunday to support immigration generally because it is "what's keeping this country's lifeblood moving forward."
In an interview with NBC's "Meet the Press," he said a path to legal status should be offered to illegal immigrants because they "are doing things we need done in this country."
He added: "They're all over my house, doing things whenever I call for repairs, and I'm sure you've seen them at your house. We've got to find a way to bring these people out of the darkness and give them some kind of status."
Powell did not say whether he's hired illegal immigrants directly or they showed up with contractors.
Powell was President George W. Bush's first-term secretary of state and the nation's top military officer in the presidency of Bush's father and in the early months of the Clinton administration. Despite his Republican standing - he was once considered a formidable prospect for the GOP presidential or vice presidential nominations but stayed out of contention - he endorsed Democrat Barack Obama in the 2008 presidential election.
In lamenting the party's rightward drift Sunday, he said Republicans must not become anti-immigration and spoke in support of legislation that would give certain children of illegal immigrants a way to become citizens if they pursue a college education or military service.
Immigration, he said, offers the U.S. a chance to maintain a youthful population in contrast with the aging of Europe and Japan.
Powell also said "fringe" elements on the right are taking a low road when they label Mr. Obama a foreign-born Muslim and peddle other false theories about non-American influences on the president's character. Mr. Obama was born in the U.S. and is Christian.
"Let's attack him on policy, not nonsense," he said.
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And he said the tea party may not become an enduring force unless it moves beyond slogans and promotes an agenda that people "can see, touch and actually believe in." It's not enough, he said, to call for goals that most Americans support, such as controlled federal spending and adherence to the Constitution.
The former secretary of state said he still sees Mr. Obama as a transformational figure, if one who has lost some of his ability to connect with people.
Powell said he's not giving up on the GOP, even in the face of a rightward drift, and says it might actually help Mr. Obama if Republicans win the House in November and gain responsibility for driving policy, not just opposing Democrats.