Naidu was chosen at the BJP parliamentary board meeting here attended by Prime Minister Narendra Modi and other senior party leaders.
The 68-year-old Naidu currently holds the two portfolios of Information and Broadcasting and Housing and Urban Affairs.
His nomination is seen as part of the saffron party's attempts to expand in south India, which has been identified by Shah as a key region for growth before the 2019 Lok Sabha elections.
The two-time BJP president is pitted against Gopalkrishna Gandhi, who was chosen by an alliance of 18 opposition parties, including the Congress, but his election is almost inevitable due to the NDA's huge numerical superiority over the opposition.
Recounting Naidu's rise through the party's ranks since he was a junior worker, Shah said, "He has been with the BJP since he was very young. He hails from a farmer's family and held important organisational posts in the party."
Asked about reports that Naidu was reluctant to take up the new responsibility, the BJP chief told reporters, "There is nothing like this". He added that the senior leader had always accepted the party's decisions.
"I do not want to get into all this now. The fact is Naidu ji is among the senior-most leaders across parties in the country," he said.
The government also hopes that Naidu's vast parliamentary experience will help in the smooth conduct of Rajya Sabha proceedings. The vice president is also the chairman of the upper house.
The four-time Rajya Sabha member was also a member of the Andhra assembly. He was the rural development minister in the first NDA government.
The electoral college for the August 5 election consists of 790 MPs of the two chambers of Parliament.
Shah said Naidu will file his nomination tomorrow, which is the last day for the filing of papers.
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