The exact detail of the sponsorship may never be revealed, but it has been reported to be worth around $100m (£62m) to $125m (£77m) over five years.
That could earn the County Down golfer around $50,000 (£31,000) a day.
Tiger Woods has been Nike's standard-bearer for 16 years, but the world number one will be paid even more.
"I chose Nike for a number of reasons," said McIlroy. "They are committed to being the best, as am I. Signing with Nike is another step towards living out my dream."
"Rory is an extraordinary athlete who creates enormous excitement with his on-course performance while, at the same time, connecting with fans everywhere," said Cindy Davis, President of Nike Golf.
"He is the epitome of a Nike athlete, and he is joining our team during the most exciting time in Nike Golf's history. We are looking forward to partnering with him to take his remarkable career to the next level."
The announcement was made ahead of the the Abu Dhabi HSBC Golf Championship this week.
McIlroy sat alongside Ms Davis, at a special media conference in the Fairmont Bab Al Bahr Hotel on Monday.
Born in Holywood, County Down, 4 May, 1989
Only child of Gerry and Rosie McIlroy
Introduced to golf by father at age of two
Educated at St Patrick's Primary School and Sullivan
World 9-10 year old Championship Tournament in Miami Florida
Youngest-ever winner of both the West of Ireland Championship and the Irish Close Championship in 2005
Same year set news competitive course record at Royal Portrush Golf Club
Wins European Amateur in Italy with the score of 274 in 2006
Turns professional in 2007
Wins US Open 2011
Wins PGA in 2012
The 23-year-old from Holywood, County Down, is currently number one in golf's world rankings.
Nike believe he is also the most marketable brand in the sport.
The deal will take him into the same league as the top global earners of last year.
Making up the top 10 includes boxer Floyd Mayweather  as well as golfers Phil Mickelson and Tiger Woods.
The figures are a combination of salary, bonuses and sponsorship.
McIlroy earned over $13m in prize money last season, and about $12m-$15m in endorsements and appearance money.
He is now set to propel himself onto the top earners list, and will be the youngest, highest paid sports star on it. He doesn't turn 24 until May.
The dollar signs aren't the most important thing for Rory, he says.
* Source Forbes business magazine
As part of a recent BBC NI television documentary, he talked of the "ridiculous" money in golf after he had banked a $3m bonus for finishing runner up in the America Fed Ex Play off series.
He said: "I feel very fortunate to be playing a sport in which the monetary rewards are so high.
"But for me it's not about the money. I have always dreamt of playing golf simply to win big tournaments."
Rory has won two Major championship successes in his last two years, but this new multi-million dollar deal will only add to the pressure to deliver even more.
Rory McIlroy has been unveiled as Nike's new brand ambassador in Abu Dhabi, making him one of the highest paid sports stars in the world.