Walt Disney Co's embattled chief executive Michael Eisner is to step down from his job a year early.
Mr Iger is a low-profile insider who will need to win over critics
The mighty media firm made famous by an animated mouse said on Sunday it had appointed its current president Robert Iger to succeed Mr Eisner.
Rebel shareholders immediately branded the appointment process a sham, saying it failed to look seriously at external candidates, something Disney denies.
Mr Eisner stood down as chairman after a bruising 2004 shareholder meeting.
At that meeting, a shareholder campaign led by founder Walt Disney's nephew Roy Disney secured a sizeable minority vote - 45% - against Mr Eisner, whom they blamed for poor financial performance and a hostile bid from cable TV firm Comcast.
Later that year, Mr Eisner announced he would give up the chief executive role in September 2006. He will now quit in September this year instead.
Mr Iger is a long-standing company insider who has been both president and chief operating officer since 2000.
The fifty-four year old once worked as a TV weatherman before rising to head ABC Inc, which was bought by Disney in 1995.
He has worked alongside Mr Eisner as his second-in-command since 2000, and has extensive experience of the group's TV, cable and international operations. Recent successes for this part of Disney's empire include the TV drama Desperate Housewives.
Mr Iger has not held posts in Disney's film business or theme parks.
However, he is seen as an effective and diplomatic trouble-shooter in dealings with shareholders and media rivals.
Disney's board said Mr Iger was chosen after "a lengthy, thorough and professional selection process comparing both internal and external candidates" and had made "crucial and substantial contributions" to Disney's revival.
Mr Eisner has led Disney for 21 years, during which its successes included blockbuster hits like The Lion King and Toy Story. Less successfully, he expanded the theme parks into Europe by launching Euro Disney.
Michael Eisner has angered investors and was due to go in 2006
Sales stagnated between 2000 to 2002, but have since picked up again.
Disney reported sales of $30.7bn (£15.9bn) in the 12 months to September 2004 compared with $27bn the previous year.
Disney struggled during the late 1990s, sparking shareholder anger, but income is now up strongly.
External candidates for the job reportedly included eBay chief executive Meg Whitman.
She is thought to have pulled out of the running on Friday after growing tired of waiting for news, the Wall Street Journal reported.
Rebel shareholders have already attacked the appointment.
"We find it incomprehensible that the board of directors of Disney failed to find a single external candidate interested in the job and thus handed Bob Iger the job by default," a letter signed by ex-directors Roy Disney and Stanley Gold said.
Hollywood heavyweight Harvey Weinstein, who heads the Miramax film studio owned by Disney, has welcomed the decision.
"I've had a great working relationship with Bob Iger and think he's a terrific choice," he told Associated Press.
Under his contract, he is eligible for up to $18m in severance pay over three years, the Wall Street Journal reported.
Shares in Disney rose 6 cents, or 0.2% to $27.65 in early trading on the New York Stock Exchange.