The company's shares were up 9% in extended trading.
Hill was at Nike for 32 years and held senior leadership positions across Europe and North America and was responsible for helping grow the business to more than $39 billion, the company said.
Hill previously was president, consumer marketplace at Nike, leading all commercial and market operations for Nike and Jordan brand, before retiring in 2020.
Nike said in a regulatory filing that Hill's compensation as president and CEO will include an annual base salary of $1.5 million. Hill will take over as CEO on Oct. 14.
The CEO change "gives a positive signal because it is someone that knows the brand and knows the company very well," Jane Hali & Associates analyst Jessica Ramirez said.
Donahoe was tasked with bolstering Nike's online presence and drive sales through direct-to-consumer channels.
The push initially helped the company build on the demand for athleisure following the pandemic, resulting in Nike touching more than $50 billion in annual sales in fiscal 2023 for the first time.
However, sales have since come under pressure and growth has slowed with LSEG expectations of Nike's annual sales at $48.87 billion for fiscal 2025 as inflation-weary customers cut back on discretionary spending and a slower-than-expected rebound in growth market China.
A lack of innovative and appealing products has also tripped demand for Nike as rival brands, including Roger Federer-backed On and Deckers' Hoka (DECK.N), attract customers with their more fashionable and trendy products.
Expectations for a change at the top were heightened after billionaire-investor William Ackman disclosed a stake in Nike. Ackman has not commented on his plans for the company.
