Dr Philip Lowe, the RBA deputy governor since early 2012, takes over the nation's most important economic job in September when governor Glenn Stevens retires.
Both Mr Stevens and his predecessor have endorsed the appointment.
The former governor Ian Macfarlane told The Australian Financial Review "he is absolutely the right person for the job.
"He is an outstanding economist and a very sensible and pragmatic policy maker," Mr Macfarlane said.
After considering a candidate list drawn up by Treasury, the Treasurer Scott Morrison settled on Lowe in a decision that has wide spread support.
"Dr Lowe is well regarded in the central banking community, financial markets, and the Australian business community, and will reinforce existing confidence in the institution," Mr Morrison said.
The University of NSW undergraduate economics medallist joined the Reserve Bank more than three decades ago and has a PhD from the Massachusetts Institute of Technology.