Knight, who started the business that became Nike in 1962 by selling trainers from the back of his car, will be replaced by William Perez, who has been president and chief executive officer of consumer goods giant SC Johnson & Son since 1996.
Commenting on the move, Knight said: "This begins an exciting new chapter in Nike's ongoing business evolution. I am confident that as CEO of Nike, Bill will lead Nike's extraordinary team of people to create an even bigger and better global company."
Perez joined SC Johnson & Son, which produces brands including Windex, 34 years ago, holding positions in marketing, brand management and general management before taking his current role. He is set to replace Knight on December 28 and takes the title of president and chief executive officer.
Perez, who is also on the board of directors of Kellogg Company, Hallmark Cards and Grocery Manufacturers of America, said he was honoured to run Nike.
"I was drawn to the company because the Nike brand perpetually stays current, making it one of the best managed on the globe."
Earlier this month, Nike unveiled a new advertising campaign for its Shox 2:45 shoes, shelving big name athletes in the creative in favour of a 'Mr Average' character.
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