The US economy created 287,000 jobs in June, the Labor Department said, rebounding strongly from disappointing growth in May.
The Dow Jones rose 250.86 points to 18146.74.
The wider S&P 500 index climbed 32 points to 2129.90, while the tech-focused Nasdaq was 79.95 points higher to 4956.76.
The dollar also jumped on the back of the jobs figures, as the possibility of a US interest rate rise in the next few months appeared to become more likely.
However, analysts warned that it could still be some time before a rate rise is seen.
"Today's report quells any concerns of a broader economic slowdown in the US," said analysts at Nomura Global Economics in a client note.
Bank shares also climbed on the indication that interest rates may go up soon.
JP Morgan and Wells Fargo gained 2%, while  Bank of America shares were up 1.23%.
Consumer retailers also had a strong day. Clothing retailer Gap gained 5% after reporting that sales rose in June.
Wholesale retailer Costco rose 1%.
Shares in its rival PriceSmart lost 8.9% after the company fell short on its third quarter earnings expectations.
(Closed): Stocks on Wall Street rose as investors welcomed stronger than expected US jobs figures.