President Ram Baran Yadav appointed Upadhyay on the recommendations of the cabinet, along with Arjun Kumar Karki as ambassador to the US, according to a notice issued by the president's secretariat.
The decision to nominate Upadhyay was taken at a cabinet meeting headed by Prime Minister Sushil Koirala in January.
The post has been lying vacant for three-and-a-half years, after the then Maoist-led government recalled ambassador Rukma Shamsher Rana, also a Nepali Congress leader, in August 2011.
Uphadhyay, who hails from Kapilvastu district in southern Nepal, does not have experience in foreign affairs or in any prior assignment in a diplomatic position.
He, however, is said to have good relations with Indian political leaders.
In the 2008 Constituent Assembly election he was elected from the Kapilavastu-1 constituency, but Upadhyay lost the elections from the same constituency last year.
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