Naidu was chosen at the BJP Parliamentary board meeting here attended by Prime Minister Narendra Modi and other senior party leaders. BJP National President Amit Shah announced Naidu's name in a press conference after the meeting.
The 68-year old Naidu currently holds the portfolios of Information and Broadcasting and Housing and Urban Affairs.
The former BJP president is pitted against Gopalkrishna Gandhi, who was chosen by an alliance of 18 opposition parties, including the Congress.
Earlier, Naidu had said the party will take the final call on its vice-president candidate.
"I'm not aspiring to become anything. Party will finally decide about the candidature," he said.
"Right now, all other things are speculations. I will accept whatever the Parliamentary Borad decides," he added.
Naidu, 68 and a former BJP President, met Modi and spoke with BJP President Amit Shah, the sources said.
Maharashtra Governor C. Vidyasagar Rao's name was also considered for the August 5 contest.
The last date for filing nomination papers for the Vice Presidential election is Tuesday.
The term of Vice President Hamid Ansari, who is also ex-officio Chairman of the Rajya Sabha, ends on August 10.
An alliance of 18 opposition parties, including the Congress, has already announced Gopalkrishna Gandhi as its candidate for vice presidential poll scheduled for August 15.
The electoral college for the election consists of 790 MPs of the two chambers of Parliament.
The ruling bloc enjoys an overwhelming majority in the electoral college and BJP has expressed confidence about garnering anywhere between 500 and 550 votes.