He becomes Australia's third national selector alongside chairman Trevor Hohns and coach Justin Langer and draws the curtain on his long playing career after the domestic Big Bash League in early February to take on the role full-time.
“I’m confident I can add value to the selection process and that my experience will be complementary to that of Trevor and Justin.”
Bailey, 37, played five Tests, 90 one-day internationals and 30 Twenty20s for Australia.
He has also been a stalwart for Tasmania, the Hobart Hurricanes and Melbourne Stars since making his first-class debut in 2004. He is currently 12 runs short of 10,000 first-class runs.
“He is an outstanding leader and one of the most respected, thoughtful and generous figures in international cricket,” said Cricket Australia’s head of national teams Ben Oliver said.
“His extensive experience across all formats, and deep knowledge of T20 cricket, will be invaluable as we head into a home T20 World Cup (next year) and beyond.”
Bailey replaces former Australian skipper Chappell, who had been Cricket Australia’s national talent manager for the past nine years as well as a selector before calling it quits in September.