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.
Upadhyay is a former minister and senior leader of the ruling Nepali Congress.
The post of Nepal's Ambassador to India had remained vacant for over three years after the then Maoist-led government had recalled ambassador Rukma Shamsher Rana, who was also appointed by Nepali Congress government.
He is a working committee member of the Nepali Congress prior to his appointment to the post. He also has served as an assistant finance minister in the Nepali Congress-led government.