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Lord Sugar became a crossbench peer after leaving the Labour party last year.
The Department for Business, Innovation & Skills announced that Lord Sugar will be tasked with encouraging more young people to start businesses while also championing the government's apprenticeship programme.
However, the move is seen by some as an attempt by Cameron to appeal to disillusioned Labour voters.
Lord Sugar would count himself as one of them - a year ago he left the Labour party due to its "negative" stance on business in the wake of former Labour leader Ed Miliband's General Election campaign. He has also been highly critical of the new Labour leader Jeremy Corbyn.
Awkwardly, the Amstrad founder and media personality - best known for being the face of "The Apprentice" on the BBC - used to have the same enterprise tsar role for Gordon Brown's Labour government.
Sugar's appointment mirrors Chancellor George Osborne's appointment of former Labour Transport Secretary Lord Adonis as the head of the new Infrastructure Commission.
In a statement, Sugar said he would be travelling "the length and breadth" of the country to advocate apprenticeships for young people. The government says it wants to create three million apprenticeships in England by 2020.
Skills Minister Nick Boles said they hired Sugar for his business credibility:
"We want every young person in Britain to get on and build a great life for themselves, whether it's by starting an apprenticeship or setting up their own business. Lord Sugar has huge credibility among young people and I am delighted that he has agreed to help the government bang the drum for apprenticeships and enterprise."
But the Conservative party leader David Cameron hasn't always been a fan of Lord Sugar.
In 2009 the Daily Mirror reported that Cameron claimed to hate "The Apprentice," adding "I can't bear Alan Sugar. I like TV to escape."
Sugar reportedly replied that "I'm glad he can't bear me. Perhaps he will stop asking people to sound me out if I want to meet him and defect to his party.
"I am still waiting for him to answer my question: If he was in power would things be any different. He seems to know when to stay silent."