"This is a region in which America is fighting two wars and facing challenges of ongoing conflict, terror, proliferation, access to energy, economic development and strengthening democracy and the rule of law," State Department spokesman Robert Wood said in a statement announcing the appointment.
Ross, a veteran of Arab-Israeli negotiations when Clinton's husband, Bill Clinton, was president, will advise on both Iran and the broader Middle East region.
The Obama administration is reviewing US policy toward Iran. It is looking into ways of engaging Tehran on a broad range of issues from seeking cooperation in Afghanistan to giving up sensitive nuclear work that the West suspects is aimed at building an atomic bomb.
"We must strive to build support for US goals and policies," said Wood.
US government agencies from the Pentagon and State Department, to the White House and Treasury, are grappling with how to devise a joint approach to curb Iran's nuclear program and Ross's role will be to help coordinate overall policy.
Wood said Ross would offer "strategic advice" and perspective on the region, coordinate new policy approaches and take part in "inter-agency activities."
"Ambassador Ross brings a wealth of experience not just to issues within the region but also to larger political-military challenges that flow from the area and have an impact outside of the Gulf and Southwest Asia, and the secretary looks forward to drawing on that experience and diplomatic perspective," said Wood.
Ross is the third high-profile diplomatic advisor or envoy to be appointed to Clinton and the new US president.
Last month former Senator George Mitchell, a seasoned diplomat, was appointed special envoy to the Middle East, responsible for Israeli-Palestinian negotiations. Diplomatic trouble shooter Richard Holbrooke, who gained prominence by brokering the peace accords that ended the war in Bosnia, was appointed special representative on Afghanistan and Pakistan.
Ross is currently counselor at the Washington Institute of Near East Policy and was a US point person on the Israeli-Palestinian peace process in both the Clinton and George HW Bush administrations.
He also served under former President Clinton as director of the State Department's policy planning staff.