The announcement was made by IUML president Panakkad Sayyid Hyderali Shihab Thangal after a top-level meeting at Panakkad on Wednesday.
Kunhalikutty was the odds-on favourite to claim the Malappuram candidature ever since sitting MP E Ahamed passed away due to cardiac arrest last month.
With Kunhalikutty in the fray, the IUML expressed confidence in retaining the seat that Ahmed had bagged with a record margin.
The IUML leadership stated it feels Kunhalikutty, who is the deputy leader of the opposition in the Assembly, is a leader the party can project even at the national level.
The UDF state leadership had also backed Kunhalikutty's candidature in Malappuram.