The Council, which will represent contractors, house builders, civil engineers, component and product manufacturers, designers and support services, begins its work in September.
CBI director-general Richard Lambert said: “The UK construction industry consists of over 250,000 firms, employing 2.1 million people in a wide variety of roles, and accounts for almost 9 per cent of GDP. Until now, this important industry has not had the single unified voice it deserves.
"The Construction Council will work closely with the major trade bodies to strengthen their efforts to represent the construction industry and ensure its concerns are clearly heard."
Mr McDonough, who will lead the work of the new Council, said the setting up of the council is particularly timely due to the difficulties the industry was facing particularly in the housing sector.
He said: "While many companies continue to enjoy good markets in the UK and overseas, others, particularly those with exposure to the UK residential market, are facing challenging times.
"The Council's new strategic role at the heart of the CBI will enable the whole sector to benefit from the CBI's unrivaled access at the highest levels in Whitehall, Westminster and Brussels."
The Construction Council will be considering a broad range of issues including the economy, energy, land use planning , procurement, climate change and skills.