The increase, which also reflected a big gain in business capital spending, outstripped forecasts on Wall Street, where most economists had looked for a rise closer to 6 percent.
Two other reports on Thursday also suggested a firmer recovery was taking root as new claims for jobless benefits remained at levels suggesting some stability in the labor market, and companies spent more on wages and benefits.
Business spending rose 11.1 percent in the third quarter, the steepest climb since the first quarter of 2000 and the second straight quarterly advance.
Spending on housing surged 20.4 percent, the largest gain in over seven years, contributing almost a percentage point to growth.
Government spending was also up, even though defense spending was flat after giving a big boost to growth in the second quarter.