A rare meeting of North Korea's ruling party has opened the way for Kim Jong-il to hand power to his youngest son.
The Workers' Party, which had not met for 30 years, convened hours after Kim Jong-un was appointed a general - even though he has no military experience.
His father, who is thought to be in poor health, was re-elected as leader, state media reported.
North Korea's succession is being closely watched because of its nuclear programme and hostility with the South.
Kim Jong-un is the elder Kim's third son and had already been identified as the most likely successor to the Communist dynasty started by his grandfather, Kim Il-sung, in 1948.
However, until Tuesday, there had been no mention of his name by state media. Little is known of him other than that he was educated in Switzerland and is about 27 years of age.
His elder brother and half-brother appear to have been ruled out of the running for the succession.
Japanese Foreign Minister Seiji Maehara said Kim Jong-un's promotion to four-star general signified a "clear assertion of intentions".
'Storm of applause'
Kim Jong-il has been described as frail. He is said to have had a stroke two years ago, and was given treatment in China, although no public comment has been made by either Beijing or Pyongyang.
There was no mention of his condition as state media reported that the once-in-a-generation session of the Workers' Party had re-elected him as general secretary amid a "storm of applause".
The television announcer spoke of "crucial" developments taking place, adding that the elder Kim had been reappointed as an "expression of absolute support and trust".
The state-run Korean Central News Agency lauded Kim Jong-il's "immortal exploits" and said they would "shine long in the history of the country".
The agency also announced the elevation of two other key figures to the post of four-star general: Kim Jong-il's sister, Kyong-hui, and a long-time family aide, Choe Ryong-hae.
The priority of military positions in North Korea's secretive power apparatus stems from the policy known as "songun" or military first.
The military, backed up by a standing army of 1.2 million troops, is said to run the country's political process through the National Defence Commission, chaired by Kim Jong-il.
His sister's husband Chang Song-taek was made second in command of the commission in June and is considered to wield immense influence.
British academic Hazel Smith who lived in North Korea for two years said Kim Jung-un would need further promotion to the National Defence Commission if he were to take over in the long term.
"But it's not by any means a done deal," she said. Real power lay with the military, she added.
The promotion of both the elder Kim's sister on Tuesday and the recent rise of her husband are being seen as providing the anointed successor with high-ranking advisers.
In Seoul, the head of Open Radio for North Korea, Ha Tae-keung, said the key was maintaining the blood line: "Both Chang and his wife will never rule North Korea as Jong-un's regents."
A small protest took place in the South Korean capital, demonstrating against what was seen as the preparation of a third generation of the Kim dynasty.
Events in Pyongyang are reminiscent of the gradual rise of the elder Kim in the mid-1970s. He was given a key post in the ruling party although he was not formally anointed as Kim Il-sung's successor until 1980.
On Monday, The Chosun Ilbo newspaper quoted an unnamed North Korean source as saying a propaganda campaign had already begun to raise Kim Jong-un's profile.
A US official said it was too soon to tell what was happening inside North Korea's leadership, but the United States was watching developments "carefully".
Images released by the North's state media on Monday showed orderly lines of delegates - some wearing suits, others in military uniform - arriving in Pyongyang.
The Associated Press reported that the capital was decorated with flags and placards announcing the meeting.
One poster read: "Warm congratulations to the representatives meeting of the Workers Party of Korea."
KCNA reported that party delegates visited the Kumsusan Memorial Palace in Pyongyang on Monday to pay respects to North Korean founder Kim Il-sung, father of Kim Jong-il.
Kim Il-sung is known as the "eternal president", while Kim Jong-il has styled himself the "dear leader".
Kim Jong-il became leader when his father died in 1994.
Under Kim Jong-il, the country's isolation from the outside world has become entrenched.
Mr Kim has built up a personality cult around his family, while North Korea's economy has all but ceased to function and its people suffer from frequent food shortages.