Sudan's candidacy to head the continental body had failed to win unanimous support because of the conflict in Darfur, where the AU is mediating peace talks and has deployed a 7,000-strong peacekeeping force.
President Denis Sassou-Nguessou, who ruled Congo for 13 years until 1992 and returned to power five years later in a coup, took over the chair from Nigerian President Olusegun Obasanjo on the final day of the AU summit in Khartoum.
In an address to African leaders after being named as chair, Sassou-Nguesso pledged to work for peace.
"I take this as a call to history, the history of Africa's renewal," he said. "I plan to commit the continent on a resolute conquest for peace."
Darfur the key
Sudan last year signed an historic deal to end 21 years of war in the south but the conflict in Darfur has continued, claiming about 300,000 lives and displacing two million people since 2003.
Darfur rebels taking part in AU-sponsored peace talks in Abuja warned they would pull out of the negotiations if Sudan was given the AU presidency.
But a Sudanese minister said that Khartoum's ambitions to lead the African Union hinged on ending the violence in the western region of Darfur.
"The writing was clear on the wall right from day one that Africa was not going to give the leadership to Sudan simply because of Darfur," said Minister from Cabinet Affairs Deng Alor, who hails from southern Sudan.
"I think that was the clear message to Sudan, that if you put your house in order, we will have no problem with you," said Mr Alor.
"I think that is what we are going to do. We are going to put our house in order, solve our problems so that come 2007 we take the lead."
Senegalese President Abdoulaye Wade said, "Sudan will next year certainly be designated but on condition that the situation improves, that there is a solution for Darfur and a solution for its relations with Chad."
US pressure
US President George W Bush's top adviser for Africa also said that Sudan should not take the helm of the AU if the bloodshed continues in Darfur.
"If they continue like they are now, in 2007, I doubt very seriously that
Sudan can be president of the AU," US Assistant Secretary of State for Africa Jendayi Frazer told journalists on the sidelines of the summit.
Human rights groups had warned that giving Sudan the AU chair would be tantamount to rewarding the regime of President Omar al-Beshir, accused by the US of genocide in Darfur, and would damage the AU's credibility.
"It's a half-step in the right direction," commented Reed Brody, spokesman for US-based Human Rights Watch.
But he added: "If Sudan's atrocities make al-Beshir unsuitable to lead
Africa this year, it's hard to see how he'll be suitable next year."
The flap over Sudan's AU bid dominated talks at the summit, which officially was to tackle issues of culture and education while touching on conflicts in Ivory Coast and Chad's border clashes with Sudan, among other problems.