The singer has been recognised as part of his previous band The Small Faces/Faces, who recently reformed minus Stewart and have toured with temporary members Ronnie Wood and Mick Hucknall.
Chaka Khan has been listed as a potential inductee as part of Rufus, while Donna Summer, The Cure, Red Hot Chili Peppers and the Beastie Boys have also received nods.
An act must have released their first single or album 25 years ago to qualify for induction and new members will be inducted at the Hall of Fame in Cleveland, US on April 14, 2012.
Last year's inductees to the Rock and Roll Hall of Fame included Alice Cooper, Neil Diamond, Darlene Love and Leona Russell.
The 2011 inductees were presented with their places by a host of stars including Elton John, Bette Midler and Paul Simon.
The Rock and Roll Hall of Fame was established in 1983 and counts The Beatles, ABBA, The Sex Pistols and Madonna among its members.
The full list of 2012 Rock and Roll Hall of Fame nominees is as follows:
Eric B. & Rakim
Guns 'N Roses
Joan Jett and the Blackhearts
Red Hot Chili Peppers
Rufus with Chaka Khan
The Small Faces/Faces
Watch Faces perform their hit 'I'm Losing You' live below: