AFP reports citing the Attorney General Eric Holder.
Three people were killed and about 260 wounded on April 15 last year when two bombs made of explosives-packed pressure cookers went off near the finish line of the Boston marathon. Several of the injured lost limbs.
Tsarnaev, then 19, and his 26-year-old brother Tamerlan Tsarnaev were cornered by police after a four-day manhunt. Tamerlan died after an exchange of fire with police and Dzhokhar was wounded.
"The nature of the conduct at issue and the resultant harm compel this decision," Holder said in a statement on the prosecution of the 20-year-old, a US citizen from a Chechen Muslim family.
Experts say the announcement -- which was widely anticipated -- is partly a symbolic gesture to the American public, for whom the bombings reignited traumatic memories of the September 11, 2001 attacks, and does not necessarily mean Tsarnaev will be executed if found guilty.
The shaggy-haired onetime student has pleaded not guilty to 30 federal charges related to the bombings, including 17 serious charges that can carry sentences of death or life in prison.
These charges include using a weapon of mass destruction resulting in death, as well as conspiracy and bombing of a place of public use resulting in death, and carjacking.
Tsarnaev is also charged in connection with the fatal shooting of a campus police officer at the Massachusetts Institute of Technology during the brothers' wild overnight getaway attempt.
The brothers are said to have built the bombs with help from an online Al-Qaeda magazine, but they are not accused of having received help from any organized foreign terror group.
Carmen Ortiz, the federal prosecutor in Massachusetts, home to Boston, said in a statement: "We support this decision and the trial team is prepared to move forward with the prosecution."
She added: "The case will now continue to proceed through the pre-trial process and the next scheduled court event is a status conference set for February 12, 2014."
The full trial, which will garner worldwide media interest, is likely to begin in the autumn and is expected to take about five months of what is sure to be harrowing testimony from runners and spectators, some of whom suffered life-changing injuries.
Massachusetts abolished the death penalty in 1982, but Tsarnaev is accused under federal law.
Of nearly 500 death sentences sought at federal level, only 70 were handed down and there have been only three actual executions since the reinstatement of the federal death penalty in 1988.
If Tsarnaev is executed, he will be the first defendant to be put to death at federal level since Timothy McVeigh, who went to the death chamber in June 2001 for the Oklahoma City bombing.
Richard Dieter, director of the non-profit Death Penalty Information Center, told AFP: "It's just an option on the table. There are many more steps to go in this process."
Judy Clarke, a renowned lawyer and specialist on the death penalty who has saved several high-profile convicts from the gallows, is representing Tsarnaev.
She will fight hard, Alan Dershowitz, a professor of law at Harvard, said recently.
Their client "wants to live and he wants to avoid execution, they are not going to say, 'I want to die, I want to join my brother'".
Clarke has successfully saved several notorious convicts from the death penalty, including Frenchman Zacarias Moussaoui, accused of complicity in the September 11 attacks on the United States, the famous "Unabomber " Ted Kaczynski, and Eric Rudolph, responsible for the Atlanta Olympic Park bombing in 1996.