Smith's appointment was made following approval by CA's Board of Directors to a recommendation by the National Selection Panel.
Smith replaces George Bailey, who is suspended for Friday's match as punishment for the team maintaining a slow over-rate during Australia's four-wicket victory against India at the Melbourne Cricket Ground on Sunday.
Smith will become Australia's 22nd One-Day International captain, although he led the side in three of the four Tests of the Commonwealth Bank Test series against India in December and January.
"It is unfortunate for George Bailey that he will miss the match in his home state but in Steven we have a dynamic player who leads from the front, by example, and we look forward to him doing so again on Friday," he said.
Shaun Marsh and Cameron White have been added to the Australia squad for Friday's match, in place of Bailey and David Warner, with the latter resting following the hamstring soreness he reported at the start of the series.
"We have bowled too many wides and we have been too slow between the overs. We have got to get better at that. We should be able to get through the overs in three-and-a-half hours with no dramas but we have been too slow," he said.
"I have spoken with the players quite firmly as we do not want that happening. We want to get through our overs, play an up-tempo game and make sure we are entertaining the people who are coming to watch in the right time frame," he added.
The Squad: Steven Smith (captain), Patrick Cummins, Xavier Doherty, James Faulkner, Aaron Finch, Brad Haddin, Shaun Marsh, Glenn Maxwell, Gurinder Sandhu, Mitchell Starc, Shane Watson, Cameron White.
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