The announcement was made at about 11pm by PAS president Abdul Hadi Awang during a ceramah in Padang Kota, Taiping.
Several thousands of PAS supporters had gathered to find out the party's candidate for the by-election.
In naming Nizar as the candidate, the opposition is turning the Bukit Gantang by-election into a referendum on the messy takeover of the Perak state government by Barisan Nasional last month.
Nizar, a mechanical engineer, is also the Pasir Panjang state representative. He had just turned 52.
He will be facing Barisan Nasional's Ismail Saffian, 49, the former Bukit Gantang Umno information chief. Nomination day is on March 29.
The parliamentary seat fell vacant following the death of PAS MP Roslan Shaharum on Feb 9.
PAS has picked Nizar from a shortlist of four candidates.
The party is confident of retaining the seat, especially with the ongoing political impasse in the state following the BN takeover.
Nizar was made the Pakatan Rakyat menteri besar after the opposition coalition took over the state in the last general election in March last year.
However his hold on the power lasted less than a year as defections of three Pakatan reps to become BN-friendly independents caused the Pakatan coalition to be swept out of office.
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