The track Jai Ho which got Rahman two Academy awards and a Golden Globe, has been nominated in the category of 'Best Song written for Motion Picture, Television or Other visual media'.
Rahman has also been nominated in the category of 'Best Compilation Soundtrack Album for Motion Picture, Television or Other visual Media' for Slumdog Millionaire.
Incidentally, this is the first time that the 44-year-old Indian musician has been nominated for the Grammys', popularly known as the Oscars of the music industry.
The song Jai Ho written by Gulzar for the 2008 film will face-off with Bruce Springsteen's title track for The Wrestler, Once in a Lifetime from film Cadillac Records, Decode from Twilight and The Client from Hannah Montana: The Movie.
The album which had earlier knocked-off Lady GaGa's The Fame on Billboards chart will now compete with the soundtracks of Quentin Tarantino's Inglourious Basterds, Beyonce starrer Cadillac Records, HBO's vampire series True Blood and Robert Pattinson starrer Vampire-romance Twilight.
The Grammy awards will be presented on January 31 at the Staples Centre in Los Angeles.
Meanwhile, Rahman will also be seen in front of the camera in the upcoming film Son of a Preacher Man about the life and times of Grammy winning singer-songwriter-producer PJ Morton.
Besides Rahman, other cast includes American Gospel musician Kirk Franklin, Grammy nominated American Idol winner Ruben Studdard, and producer Warryn Campbell.
Shot in Atlanta and New Orleans in USA and London in United Kingdom, it will be released in 2010. Michael Akwesi Djaba (Reasonable Excuse) is the director.
Rahman and Morton collaborated on Sajna song in the recent Hollywood comedy Couples Retreat.
Taylor Swift, Beyonce face off at the Grammys
Movie time for Katrina & Ranbir
Mumbai is for all Indians, says Tendulkar
Zakir Hussain wins a Grammy
Army jawan commits suicide in JK