"The prime minister for the transition period that is scheduled to end in October, 2006 is Mr Charles Konan Banny," said a statement signed by South African President Thabo Mbeki, Nigerian President Olusegun Obasanjo and Niger President Mamadu Tandja.
They said Mr Banny, 63, would be given broad powers specified by the United Nations Security Council, including financial and human resources, control over security and defense forces and oversight of the electoral process.
The statement said Mr Banny, who is governor of the Central Bank of West African States (BCEAO), would not himself be eligible to run in the election to replace President Laurent Gbagbo.
The head of the rebel New Forces, who have held the northern part of the country since a civil war in 2002, welcomed the appointment.
"We congratulate him and wish him a lot of courage," said Alphone Djedje Mady.
"The first duty of every Ivorian worthy of the name is to help him succeed in his mission in the interest of the country and peace."
The country has teetered on the brink of fresh violence because of the difficulty in finding a leader acceptable both to the government and the rebels.
The UN Security Council on October 21 agreed to allow Mr Gbagbo to remain an extra 12 months in office after attempts to disarm political factions stalled, leading to the cancellation of the October 30 presidential election.
But the Council stipulated he hand over powers to an independent prime minister.
Step forward
Mr Obasanjo said the nomination was "a step toward radical change for a new Ivory Coast."
"This is not a victory for a specific person," he told reporters. "It is the victory of all Ivorians, whether on the side of the government or of the rebellion."
Flanked by Mr Gbagbo, Mr Obasanjo said, "Today is a day on which destruction will be replaced by construction, and conflict by reconciliation. We are at a stage when bitterness will be replaced by love."
The UN-appointed mediators arrived in Ivory Coast earlier in the day from a Franco-African summit in Mali which demanded progress in the Ivory Coast's festering leadership dispute.
Despite more than a month of AU-brokered negotiations, the divided West African country's political groups had failed to agree on a transitional prime minister until Sunday's breakthrough.
Complete control
The three mediators said that Mr Banny would have all the powers the Council specified in its October 21 resolution.
They include complete control over his cabinet, allowing him to take over portfolios of ministers who boycott government sessions, and authority over all security, defense, electoral and financial matters.
The resolution also gives the prime minister responsibility for implementing the program of disarming and integrating militias.
Mr Banny will replace Seydou Diarra, who has been prime minister since the January, 2003 peace agreement signed at Marcoussis, near Paris and never put into effect.
A former French colony and the world's leading cocoa producer, Ivory Coast has been divided since the fighting broke out in 2002, pitting Mr Gbagbo's government against rebels who control the mostly Muslim north of the country.