Clinton made the announcement at the State Department after meeting privately with ousted Honduran President Manuel Zelaya.
She said Zelaya as well as the politician who took over as defacto Honduran leader, Roberto Micheletti, agreed to the Arias role as mediator. She said Arias would work on the problem from Costa Rica, not in Honduras.
Clinton noted that Arias won the Nobel Peace Prize in 1987 for helping broker an end to Central America's civil wars. She said she spoke to him earlier Tuesday.
"He is the natural person to assume this role," she told reporters.
Clinton also called on all parties to refrain from further violence in an effort to resolve the political crisis.
She said her meeting with Zelaya was productive.
"I reiterated to him that the United States supports the restoration of the democratic, constitutional order in Honduras," she said.