The panel voted 14 to 8 in favor of the former UC Berkeley professor and current Fed vice chair, with three Republican members joining 11 Democrats in sending the nomination to the Senate floor.
If confirmed, Yellen would be the first woman to lead the 100-year-old central bank.
She needs the backing of at least five Republican senators to prevent a filibuster, and it appeared that a number of other Republicans were prepared to support the nomination.
The only question appears to be whether Yellen will get more than the 70 votes that current Fed Chairman Ben S. Bernanke received in 2010. That was the lowest ever for a Fed chief confirmation.
Bernanke is stepping down at the end of January after two four-year terms as chairman that came during a tumultuous period for the American economy and financial system.
He has led a Fed that has taken unprecedented actions to resuscitate an economy that saw its biggest fall since the Great Depression and has expanded at a disappointing pace since recovering in mid-2009.
Yellen is widely expected to push the Fed along the path set by Bernanke, maintaining easy-money policies to spur investments and spending to foster stronger growth in the economy, particularly the job market.
In urging his colleagues to support Yellen, Senate Banking Committee Chairman Tim Johnson (D-S.D.) called Yellen a "model candidate" to become the Fed chair, arguably the most powerful economic post in the world.
“She has devoted a large portion of her professional and academic career to studying the labor market, unemployment, monetary policy, and the economy," Johnson said in a statement. “As we saw in her testimony last week," he added, "Dr. Yellen understands the challenges facing our economy and the balance the Fed must strike as we navigate the path back to full employment."
Yellen won the support of three Republicans on the committee: Bob Corker of Tennessee, Mark Kirk of Illinois and Tom Coburn of Oklahoma. One Democrat, Joe Manchin III of West Virginia, voted against her.
Sen. Mike Crapo (R-Idaho), the ranking Republican on the Banking Committee, said he was voting against her nomination because of what he termed the Fed's unconventional monetary policies -- namely the central bank's purchases of tens of billions of dollars of bonds every month in an effort to drive down long-term interest rates and stimulate growth.
"The long-term costs of these policies are unclear and, frankly, worrisome," he said. "The immediate benefits are questionable and markets have become too reliant on monetary stimulus."
The Fed is preparing to wind down those purchases as it sees the economy on a stronger footing.