"Fazlullah has been elected as the new chief," Tehrik-e-Taliban Pakistan (TTP) spokesman Shahidullah Shahid told reporters.
The move came a week after Mehsud was killed in the drone attack in North Waziristan on Friday.
The Taliban Shura or council also chose Sheikh Khalid Haqqani as deputy chief of the group.
Known for his ruthlessness, Fazlullah was nicknamed "Mullah Radio" for his fiery sermons on an illegal FM station while heading a parallel administration in Swat Valley, 160 km from Islamabad, during 2007-09.
When the Pakistan Army sent troops into Swat to flush out the militants in early 2009, Fazlullah fled with hundreds of his fighters to Afghanistan, from where he ordered the attempt on the life of Malala Yusufzai last year.
Fazlullah rose to prominence as a leader of the banned Tehrik-e-Nifaz-e-Shariah-e-Mohammadi (TNSM), which merged with the TTP in 2007 following the military crackdown on extremists holed up in Lal Masjid in Islamabad.
Earlier this year, the Taliban released a video to claim the killing of Maj Gen Sanaullah Khan Niazi in a roadside bombing which showed Fazlullah celebrating the success of the attack.
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