The move will give Apple's set-top box access to the fourth most popular destination on the internet, and a video community that uploads more than 100 million videos a day.
Apple chief executive Steve Jobs made the announcement at the D5 Conference, along with a demonstration of Apple TV's YouTube capabilities.
"This is the first time users can easily browse, find and watch YouTube videos right from their living room couch, and it's really, really fun," he said in a statement.
The free software plug-in will add YouTube support as a feature to the Apple TV menu. The company said that the plug-in is scheduled for mid-June.
Apple also announced a higher capacity Apple TV device which will cost $399. The unit will feature a 160GB hard drive, four times larger than the current 40GB model which retails at $299.
The company estimates that the latest model can hold 200 hours of video, 36,000 songs or 25,000 photos.
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