The new note will debut in 2020 to mark the 100th anniversary of the US Constitution’s 19th amendment, which gave women the right to vote.
The treasury will seek the public’s input in the selection, looking for a “champion for our inclusive democracy”.
Former US political leaders – all white men – currently headline US notes.
The woman who the Treasury Department ultimately selects will replace Alexander Hamilton, a key figure in the American Revolution and the first secretary of the US Treasury.
Hamilton began appearing on the $10 note in 1929. He along with diplomat and inventor Ben Franklin are the only non-presidents featured on current US notes.
Women have been featured on US money before, but the notes and coins were not widely used. Most recently women’s rights activist Susan B Anthony and Native American Sacagawea appeared on dollar coins, but both coins quickly went out circulation.
The primary goal of the redesign is to add measures to thwart counterfeiters, the Treasury Department said. But women’s groups have recently pressed for more representation on US notes.
“We have only made changes to the faces on our currency a few times since bills were first put into circulation, and I’m proud that the new 10 will be the first bill in more than a century to feature the portrait of a woman,” said Treasury Secretary Jacob Lew.
In March, an independent group held a contest to select a woman to headline the $20 note, replacing former President Andrew Jackson.
Abolitionist Harriet Tubman was the public’s top choice, beating out finalists, former first lady Eleanor Roosevelt, civil rights activist Rosa Parks and leader of the Cherokee nation Wilma Mankiller.
Tubman was known as the “conductor” of the Underground Railroad that allowed many slaves to escape to freedom in the 1850s.
Mr Lew will make a decision about the selected woman by the end of year.