Deadline looming
Khalid Sheikh Mohammed has been described by US investigators as "one of history's most infamous terrorists".
Paul Reynolds
Paul Reynolds, BBC World Affairs correspondent
The decision is a major step towards Mr Obama's target of closing Guantanamo Bay a year after he took office. However, it will not solve all the remaining problems.
The most difficult is what to do with an estimated 70 prisoners against whom there is not enough useable evidence for either a military or a civilian trial yet whose release is regarded as too dangerous. Other prisoners might also face civilian trial or military commissions, so Mr Obama appears unlikely to decide that a civilian court should be the only place where suspects will face justice.
It remains to be seen whether the federal court will accept any alleged confession by Khalid Sheikh Mohammed as it might have been based on water-boarding, or whether, in a courtroom very close to Ground Zero, he will seek to glory in the attacks.
They say he has admitted being responsible "from A to Z" for the 9/11 attacks.
Believed to be the number three al-Qaeda leader, he was captured in Pakistan in March 2003.
He told a pre-trial hearing at Guantanamo in December 2008 that he wanted to plead guilty to all charges against him.
The other four men - thought to be the two Yemenis, a Saudi and a Pakistani-born Kuwaiti who have shared hearings with him at Guantanamo Bay - are also accused of helping plan and finance the attacks.
The decision to try them in a New York court appears to be part of Mr Obama's efforts to close Guantanamo by 22 January 2010.
His administration says it will try some detainees in US courts and repatriate or resettle others who are not perceived as a threat.
However, questions remain over the fate of those assessed as dangerous but who for legal reasons could not be prosecuted in a US court - prompting suggestions that the deadline will slip.
And, says the BBC's Jonathan Beale, some families of those who died in the 9/11 attacks have already voiced strong opposition to any attempt to try their alleged architect in New York.
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