Khalid Sheik Mohammed, the professed mastermind of the Sept. 11, 2001, terrorist attacks, had been slotted for trial in New York before President Obama bowed to political resistance last month and blocked the Justice Department's plans.
"While not unexpected, this is the final nail in the coffin of that wrong-headed idea," New York Senator Charles Schumer said. "I have always said that the perpetrators of this horrible crime should get the ultimate penalty, and I believe this proposal by the administration can make that happen."
Four alleged co-conspirators will also be tried at Gitmo: Waleed bin Attash, a Yemeni who allegedly ran an al-Qaida training camp in Afghanistan; Ramzi Binalshibh, a Yemeni who allegedly helped find flight schools for the hijackers; Ali Abd al-Aziz Ali, accused of helping nine of the hijackers travel to the United States and sent them $120,000 for expenses and flight training, and Mustafa Ahmad al-Hawsawi, a Saudi accused of helping the hijackers with money, Western clothing, traveler's checks and credit cards.
Mayor Michael Bloomberg said a military commission is a "more appropriate" choice than a civilian trial.
Bloomberg said New York City could have provided the security for a civilian trial, but added it's better to be spared the considerable expense.
Families of victims are frustrated that Obama's attempt to move the trial to New York caused a delay in the legal proceedings.
Debra Burlingame, whose brother was the pilot of American Airlines Flight 77, said the military trials should have begun in 2009.
She said the administration of President Barack Obama has put families through "unnecessary hell" for two years.
Nancy Nee, whose firefighter brother died at the World Trade Center, said a military trial is "the right thing to do."
Republicans wasted no time Monday in criticizing the delay in the trial for the 9/11 suspects.
"It's unfortunate that it took the Obama administration more than two years to figure out what the majority of Americans already know: that 9/11 conspirator Khalid Sheikh Mohammed is not a common criminal, he's a war criminal," said House Judiciary Committee Chairman Lamar Smith of Texas.
Guantanamo has been a major political and national security headache for the president since he took office promising to close the prison within a year, a deadline that came and went without him ever setting a new one.
Obama reversed course last month and ordered a resumption of military trials for terror suspects at Guantanamo Bay, Cuba.
Obama made the change with clear reluctance, bowing to the reality that Congress' vehement opposition to trying detainees on U.S. soil leaves them nowhere else to go. The president emphasized his preference for trials in federal civilian courts, and his administration blamed congressional meddling for closing off that avenue.
"I strongly believe that the American system of justice is a key part of our arsenal in the war against al-Qaida and its affiliates, and we will continue to draw on all aspects of our justice system - including (federal) courts - to ensure that our security and our values are strengthened," Obama said in a statement at the time.
"Going forward, all branches of government have a responsibility to come together to forge a strong and durable approach to defend our nation and the values that define who we are as a nation."
The first Guantanamo trial likely to proceed under Obama's new order would involve Abd al-Rahim al-Nashiri, the alleged mastermind of the 2000 bombing of the USS Cole. Al-Nashiri, a Saudi of Yemeni descent, has been imprisoned at Guantanamo since 2006.
Defense officials have said that of around 170 detainees at Guantanamo, about 80 are expected to face trial by military commission.
Critics of the military commission system, which was established specifically to deal with the detainees at Guantanamo, contend that suspects are not given some of the most basic protections afforded people prosecuted in American courts and that serves as a recruitment tool for terrorists.
Obama's administration has enacted some changes to the military commission system while aiming to close down Guantanamo.
More than two dozen detainees have been charged there, but the charges against a number of them were dismissed in the wake of Obama's order in January 2009 to halt the commission process.
So far six detainees have been convicted and sentenced, including Ali Hamza al-Bahlul, Osama bin Laden's media specialist who told jurors he had volunteered to be the 20th Sept. 11 hijacker. He is serving a life sentence at Guantanamo.
Meanwhile, the first Guantanamo detainee tried in civilian court - in New York - was convicted in November on just one of more than 280 charges that he took part in the al-Qaida bombings of two U.S. embassies in Africa. That case ignited strident opposition to any further such trials.
Information from The Associated Press included in this report.