The 52-year old replaces Lieutenant-General Dan Halutz, who resigned after heavy criticism of Israel's war with Lebanon last summer.
Ehud Olmert, the Israeli prime minister, said at the weekly Israeli cabinet meeting: "Gabi [Ashkenazi] is a valuable commander who has proven reliable.
"There is no doubt that he will be able to lead the [Israeli army], confront the challenges facing the army and ensure the safety of Israel."
Güncelleme Tarihi: 20 Eylül 2018, 18:16
He was widely seen as a safe candidate to replace Halutz.
Ashkenazi's appointment comes ahead of the preliminary findings, expected in the coming weeks, of a government-appointed panel examining the handling of the war by Israeli leaders and military commanders.
He is currently director-general of the defence ministry and was not in uniform during the 34 days of fighting in which about 1,200 Lebanese and 157 Israelis were killed.
Ashkenazi joined the elite Golani infantry brigade in 1972, rising through the ranks to become its commander in 1986.
In 1976 he took part in a raid that rescued Jewish passengers taken hostage after an Air France flight was hijacked and flown to Entebbe, Uganda.
He was wounded in 1978 in a military operation in Lebanon.
He was named commander of Israel's northern military region in 1998 and deputy chief of staff in 2002.
He resigned from that post three years later when Halutz was given the top job, and moved to the defence ministry.