Leavitt will succeed, who recently resigned.
Mr. Bush made the announcement Monday morning at the White House, calling Leavitt, "a fine executive and man of great compassion."
He said Leavitt was "an ideal choice to lead one of the largest departments in the U.S. government."
The move leaves just one Cabinet opening on the president's plate – a replacement forto run the Department of Homeland Security Department. Kerik abruptly withdrew his nomination Friday night, citing immigration problems with a family housekeeper.
Leavitt thanked the president for showing confidence in him. "I feel a real sense of understandable regret" about leaving the EPA, he said.
He said his new agency, the department of Health and Human Service, plays a vital part in the lives of every American.
Leavitt, 53, served as Utah's governor for 11 years before he was appointed to lead the EPA last year.
As recently as last week, Dr. Mark McClellan, the administrator of the Centers for Medicare and Medicaid Services, had the inside track for the HHS job, White House officials and many health care analysts said.
But McClellan is overseeing the new Medicare prescription drug law, which takes full effect in 2006, and Mr. Bush was said to be reluctant to take McClellan from his post during this critical period.
McClellan, the brother of White House press secretary Scott McClellan, previously served as administrator of the Food and Drug Administration and as an economics adviser to the president.
Thompson, a former governor of Wisconsin, announced his resignation Dec. 3, using the occasion to issue a warning about the vulnerability of the nation's food supply to terrorist attack.
The HHS secretary oversees Medicare and Medicaid, the mammoth government health programs for the elderly, poor and disabled, as well as the FDA, the Centers for Disease Control and Prevention, the National Institutes of Health and the Indian Health Service.
The agency has a budget of more than $500 billion and 67,000 employees.
Leavitt, in the EPA job only a year, quickly won a reputation as a Bush loyalist. He also shares Mr. Bush's enthusiasm for technological and market-based approaches to fixing problems.
At EPA, most of Leavitt's focus has been on crafting strategies to reduce air pollution. While in Utah, he had cut several environmental deals with the Bush administration, including settling a long-standing dispute over ownership of roads across federal land. He also negotiated exchanges of state and federal land, some of them questioned by Interior Department auditors.
He also had advocated a major highway extension through wetlands and wildlife habitat near the Great Salt Lake, a project halted by the 10th Circuit U.S. Court of Appeals because of concerns about wildlife needs.
Leavitt, a father of five and devout Mormon, moved to Washington in the past year with his wife, Jacalyn, and a son in high school. Before becoming governor, he was chief operating officer of the Leavitt Group, an insurance firm.