The families of those killed in the Sept. 11 attacks have waited almost a decade for justice, and "it must not be delayed any longer," Holder told a news conference.
Holder had announced the earlier plan for trial in New York City in November 2009, but that foundered amid widespread opposition to a civilian court trial, particularly in New York. Congress passed legislation that prohibits bringing any detainees from the prison at Guantanamo Bay, Cuba, to the United States.
Monday, the attorney general called the congressional restrictions unwise and unwarranted and said a legislative body cannot make prosecutorial decisions.
Most Republicans applauded the turnabout, but Holder said he is convinced that his earlier decision was the right one. The Justice Department had been prepared to bring "a powerful case" in civilian court, he said.
In New York on Monday, the government unsealed and got a judge to dismiss an indictment in the case that charged Mohammed and the others with 10 counts relating to the Sept. 11, 2001 terrorist attacks. The dismissal was because the accused will not be tried in civilian court.
The indictment said that in late August 2001, as the terrorists in the United States made final preparations, Mohammed was notified about the date of the attack and relayed that to Osama bin Laden.
Some 9/11 family members supported the change to military commissions.
"We're delighted," said Alexander Santora, 74, father of deceased firefighter Christopher A. Santora. The father called the accused terrorists "demonic human beings, they've already said that they would kill us if they could, if they got the chance they would do it again."
Republican lawmakers, who led the opposition to a trial in civilian court, welcomed the administration's shift.
"While it is unfortunate that it took so long to make this announcement, I am pleased that the Obama administration has finally heeded those who rebuked their decision and that the trial is being held where it belongs," said Senate Judiciary Committee Republican Jeff Sessions of Alabama.
New York Republican congressman Peter King, who has opposed trying the 9/11 conspirators in federal court, said Monday's decision is a vindication of President George W. Bush's detention policies. Some Democrats also said holding a trial in New York was the wrong way to go.
The American Civil Liberties Union criticized the administration's decision.
Cases prosecuted in military commissions now "are sure to be subject to continuous legal challenges and delays, and their outcomes will not be seen as legitimate. That is not justice," said ACLU executive director Anthony D. Romero.
Holder said it is unclear whether the five men could receive the death penalty if they plead guilty in military court.