Major-General Duncan Lewis, 52, a former commander of the Perth-based Special Air Service Regiment and inaugural head of the Special Operations Command, begins his new job next month, Prime Minister John Howard's office said.
The appointment is part of a major boost to national security and is likely to lead to a further shake-up of Australia's intelligence network, severely criticised over its failures in Iraq, East Timor and others theatres of conflict.
It follows Howard's announcement in the lead-up to October 9 elections that he won that the government was setting up a special spy school to train counter-terrorist agents from Australia, Southeast Asia and the Pacific.
The 20-million-dollar (14.5 million US) centre for counter-terrorism, cooperation and intelligence training is the latest in a range of national security measures unveiled as part of Australia's "war on terror".
Howard also announced an additional 36.6 million dollars in funding for the government's major intelligence service, the Australian Security Intelligence Organisation.
He said the Bali bombings which claimed 88 Australian lives in October 2002 and a bomb blast that killed nine people outside the Australian embassy in Jakarta last month demonstrated the need for closer links between intelligence, defence and security.
Lewis will have the title of first assistant secretary of the national security division of the Department of Prime Minister and Cabinet. The division was set up to support the prime minister and coordinate national security activities across government.
He replaces a senior public servant and will be the first military officer to hold the top-level position, which reports directly to the prime minister and to cabinet's national security committee.
Lewis has enjoyed a distinguished military career, including taking command of the Special Air Service Regiment (SASR), serving as a defence adviser at the Australian embassy in Jakarta and commanding the Special Operations Command from December 2002.
The Special Operations Command is composed of a joint headquarters, the SASR, 4th Battalion Royal Australian Regiment (Commando), the special counter-terrorist tactical assault groups, the reserve 1 Commando Regiment and the Incident Response Regiment.