Jackson will become president and chief executive of the division and will report to Barry Diller, chief executive of USA Networks.
Jackson joined Channel 4 in 1997 and has been credited with developing the station's commercial operation 4 Ventures and the creation of its film channel and entertainment channel, FilmFour and E4 respectively. He has also widened Channel 4's appeal, spending money on ratings-winning shows such as 'Friends', 'Ally McBeal' and 'ER'.
Before joining Channel 4, he was the BBC's director of TV and controller of BBC 1. He had been tipped to become a future director general at the corporation and industry speculation suggests that this could still be the case.
The industry has already begun to speculate on who might replace him. Names being mentioned include Dawn Airey, chief executive of Channel 5, Peter Bazalgette, creative director of Endelmol Entertainment UK the firm behind Big Brother, and Richard Eyre, former chief executive of ITV and Pearson Television.
Barry Diller, chairman and CEO of USA Networks, said: "For some time now, I've tried to induce Michael Jackson to join USA...finally, and at a definitive juncture in the life of our entertainment assets, this remarkable executive has agreed to lead our entertainment businesses. He has had great success in building up Channel 4 into a major force in Britain."
He added: "He is a genuinely creative programmer and in the end, and for us something of the beginning, that's what will distinguish our production and distribution of television programs and theatrical motion pictures. For USA, which has its heart in both entertainment and interactivity, and which places such demand on the time of its senior-most executives as the scale of our businesses and attendant opportunities grow and abound, having Michael Jackson join us is...just great."
The Entertainment unit, which Jackson will head, includes three divisions USA Cable, Studios USA and USA Films: USA Cable includes the SCI FI Channel and is in the process of launching three new cable programme services: Trio, Newsworld and Crime, as part of its Emerging Networks division.