Jens Weidmann has been named to take over the helm of the Bundesbank, running the central bank of Germany in Europe's strongest economy.
It means he also gets a seat on the 17-member strong European Central Bank (ECB) governing board.
Mr Weidmann will succeed Axel Weber, who steps down from the role at the end of April "for personal reasons".
He is a former student of Mr Weber, who has described him as an "outstanding economist".
At 42, he will be the youngest ever head of the 54-year old Bundesbank.
Mr Weidmann has most recently been an economic adviser to the German Chancellor, Angela Merkel, and has also worked at the International Monetary Fund and in the Bundesbank itself, in the monetary policy department.
'Culture of stability'
Mrs Merkel said she was convinced that he would be "an excellent president of the Bundesbank, and a representative for Germany who will raise his voice for a culture of stability at the European Central Bank - representing Germany's very best interests".
Mr Weidmann is expected to bring a more diplomatic tone to the role than Mr Weber, who has voiced his opposition to the ECB's policy of stepping in to buy government bonds from countries with high debt levels.
The policy has been central in supporting the eurozone throughout its troubled past year and has helped countries to borrow money if international market investors have either shied away from buying government debt, or demanded too high a rate for it.
Opposition to this policy had put Mr Weber at odds with many European central bankers.
But Mr Weidmann is expected to continue Mr Weber's focus on fighting inflation.
David Kohl, an analyst at Julius Baer, said: "I wouldn't expect major changes in the general direction of economic policy."
Axel Weber had been widely expected to succeed Jean-Claude Trichet as president of the European Central Bank later this year.
Mario Draghi, governor of the Bank of Italy, is currently the favourite to take over from Mr Trichet when his eight-year term comes to an end.
In a poll of economists carried out by Reuters, 29 out of 45 said they expected Mr Draghi to get the job.