O'Sullivan is regarded as Ireland's best hope of striking gold at the games.
The athlete said the honour was something she would "always cherish''.
"I really feel honoured in being selected to carry the flag of my country and feel really proud to be chosen ahead of many other people on the team," added O'Sullivan.
This will be the first occasion O'Sullivan actually walks in the opening parade as she missed the ceremonies in Barcelona and Atlanta.
Previously she felt it might interfere with her preparations but O'Sullivan is adopting a more relaxed approach on this occasion.
Wayne McCullough (1988), Michelle de Bruin (1992) and Francis Barrett (1996) carried the Irish flag at the last three Games.
The 30-year-old Cobh athlete's pre-games preparations have gone well. Her 5,000 metres heats take place on Friday, September 22.
Struggling
O'Sullivan is keen to make up for her disappointing games in Atlanta four years ago when she was struggling due to illness.
O'Sullivan won the world 5,000 metres title in 1995 and completed a golden 5,000 and 10,000 double at the European championships two years ago.
She missed almost all of the 1999 due to the birth of daughter Ciara in July.
The vast majority of Irish Olympians are expected to take part in Friday's opening ceremony.
There are also slim hopes that there could be a late addition to the Irish team with boxer Bernard Dunne on stand-by down under in the event of withdrawals from his weight.
Meanwhile, Olympic gold winning rower Matthew Pinsent will carry the British flag at Friday's opening ceremony.
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