His dismissal came after it emerged that he provided inaccurate information about Clinton's emails in a Congressional testimony last week.
The White House announcement has sent shockwaves across Washington.
Comey was investigating the Trump team's alleged links to Russia.
18 May 2017
Former FBI chief Robert Mueller to lead Russia-Trump investigation
The US Department of Justice (DOJ) has named former FBI director Robert Mueller as special counsel to investigate Russia's alleged ties with Donald Trump's campaign and Moscow's election interference.
There were mounting calls for a special prosecutor after Trump fired the most recent FBI director James Comey last week.
Mueller's appointment has been praised by both Democratic and Republican lawmakers.
Who is Robert Mueller?
Mueller, 72, is a decorated US Marine who served in the Vietnam War. He became a lawyer in the US attorney's offices and DOJ.
In 2001, Mueller was appointed FBI director by the then President George W. Bush.
CNN describes him as a "non-political, dogged investigator, respected on both sides of the aisle."
He is the second-longest FBI director in history.
Mueller oversaw FBI as it countered terror post 9/11
As an attorney, Mueller led investigations which secured the convictions of dreaded mobster John Gotti. Mueller oversaw the FBI after the 9/11 attacks. His tenure saw the rise of the al-Qaeda and expansion of the US' surveillance programs amid an increase in home-grown terrorism.
Why was Mueller appointed special counsel?
A special counsel can be appointed by the attorney general or deputy attorney general to mount an independent investigation if the attorney general has recused himself.
The decision to appoint Mueller was made by deputy attorney general Rod Rosenstein.
Rosenstein said, given the current circumstances, it's in "public interest" to handover the Russia investigation to a "person who exercises a degree of independence."
Trump confident that Mueller's investigation will clear him
Trump said Mueller's investigation would clear him and his team.
Senior Democratic Senator Chuck Schumer said Mueller was "exactly the right kind of individual for this job."
Republican lawmaker Jason Chaffetz, who heads the House Oversight Committee, said Mueller has "impeccable credentials."
"I accept this responsibility and will discharge it to the best of my ability," Mueller said.