"His 33-year tenure at P&G prepares him well for a huge agency with management challenges in servicing more than eight million veterans a year," the official said.
Mr. McDonald served as chief executive of Procter & Gamble Co. from 2009 until May 2013.
Mr. McDonald, a former paratrooper, graduated at the top of his class from West Point and served as a captain in the U.S. Army for five years.
Mr. McDonald resigned from Procter & Gamble last year after 33 years at the company after investors grew concerned that he wasn't doing more to cut costs and deliver more consistent results.
The White House also highlighted Mr. McDonald's work serving veterans, noting that he has been a significant supporter of the U.S. Military Academy and is a life member of the U.S. Army Ranger Association.
"This is step one in a much larger plan that will be necessary to reform the VA," said Paul Rieckhoff, founder of Iraq and Afghanistan Veterans of America, a veterans' advocacy group. "One person isn't going to fix this massive bureaucracy."
Mr. Rieckhoff criticized the president for what he said has been an opaque selection process. "He's really doing this without any counseling from the veterans' community," he said.
Sen. Bernie Sanders, an independent from Vermont who leads the Senate Committee on Veterans' Affairs, struck a neutral tone on the expected nomination.
"The VA needs significantly improved transparency and accountability, and it needs an increased number of doctors, nurses and other medical staff," Mr. Sanders said in a statement. "I look forward to meeting with Mr. McDonald next week to ascertain his views on these important issues."
Mr. McDonald, who lives in Cincinnati with his wife, has donated to Republican candidates, including 2012 GOP presidential nominee Mitt Romney, House Speaker John Boehner and Ohio Sen. Rob Portman, according to filings tracked by the Center for Responsible Politics.
Mr. McDonald was appointed by President George W. Bush in 2007 to an advisory committee on trade policy and reappointed to the panel by Mr. Obama in 2010.