The acclaimed filmmaker headed a government-appointed committee, set up in 2016, to revamp the functioning of the CBFC.
Joshi replaces Pahlaj Nihalani, who was appointed in January 2015, and since then made headlines for a number of controversial moves and statements.
When asked if the songwriter-poet's appointment as the new CBFC chief would bring relief to filmmakers, Benegal told PTI, "Prasoon Joshi himself is an artiste. He is a highly rated poet, he also knows media extremely well.
"He was the head of the best advertising agency of India, he understands mass media, cinema, television, press.
So I cannot think of a better choice (than him)."
Filmmakers have often complained of arbitrary objections and cuts sought by the Censor Board.
A list of banned "cuss" words, circulated by Ex-CBFC chief had also become a subject of controversy. Following which, in January 2016, the government constituted a committee headed by Benegal to look into the board's functioning and was asked to come up with suggestions.
The committee submitted some recommendations to the Information and Broadcasting Ministry related to censorship in films in its first report in April 2016.
The committee also included Kamal Haasan, filmmaker Rakeysh Omprakash Mehra, ad-man Piyush Pandey, film critic Bhawana Somaaya and National Film Development Council managing director Nina Lath Gupta