Haji Abdul Qadir will be the new governor of Nangarhar province, which controls the main road between Kabul and the Khyber Pass on the border with Pakistan.
Mr Qadir is one of the few members of the Northern Alliance from the dominant Pashtun ethnic group, which formed the Taleban's power base.
Mr Qadir, who fled the region in 1996 after it was captured by the Taleban, originally welcomed Osama Bin Laden when he arrived from Sudan in the mid-1990s.
Timely decision
He is the brother of the prominent anti-Taleban guerrilla leader, Abdul Haq, who last month was captured and killed by the Taleban after he returned to Afghanistan to try to persuade members of his Pashtun ethnic group to abandon the Taleban.
The militia commanders who are now controlling Jalalabad took two days to reach an agreement on how to share power.
A Shura, or council, with representatives from several different factions and militias met throughout Friday.
There had been fears that the talks would break down and that with hundreds of heavily armed gunmen on the streets of the city this would spark more violence.
Normality returning
Haji Hayatullah, a member of the Shura for the eastern region, told the French news agency AFP that the "situation is returning to normal" following the Taleban's withdrawal from Jalalabad on Wednesday night.
Hard-line Pashtun warlord Younis Khalis had also been a contender for power in the province.
Until very recently Mr Khalis was aligned with the Taleban, but he deserted the movement to claim the key Torkham checkpoint on the Pakistani border after Kabul fell.
Breakthrough
Mr Qadir's victory is seen as a breakthrough for moderate elements in Afghanistan.
"This is an important advance," said one diplomat. "It proves that the Pashtuns are capable of working together and that they can be a counterweight to the Northern Alliance."
Mr Hayatullah said the peaceful resolution of the Nangarhar power struggle was proof that Afghans did not need the United Nations to manage their affairs.
"We can arrange our own forums anytime," he said. "We should not wait for the UN."