Ford chief executive Alan Mulally, who is widely credited with saving the US carmaker during the depths of the 2008-2009 recession, is retiring in July.
He will be replaced by chief operating officer Mark Fields, 53, who has been with Ford since 1989.
In a statement, the company said Mr Mulally, 68, will be remembered for engineering "one of the most successful business turnarounds in history".
Chairman Bill Ford said Mr Mulally had been a "hall of fame" chief executive.
The succession was widely expected: Mr Mulally had previously announced that he would retire at the end of this year.
Ford has posted a profit for nearly five consecutive years under his leadership, and it was the only one of the big three US carmakers that did not have to seek a bailout from the US government during the recession.
Mr Fields was named chief operating officer in December 2012.
The challenge for Mark Fields is how to continue to build on Mr Mulally's formidable legacy and Ford's current success.
And they are big shoes to fill.
But executive chairman Bill Ford told me Mr Fields "is up for it".
Mr Fields oversaw the company's international operations, having worked in Japan, Europe and Argentina. He also ran the company's North American operations during a difficult time - experience that will come in handy running a global carmaker.
One of his first challenges involves Ford's F series truck.
The bestselling vehicle in the US is a major profit-maker for Ford. It's getting a dramatic makeover with a body built almost entirely out of aluminium.
But, now that he's behind the wheel, few expect Mr Fields to make any major changes to the 'One Ford' strategy, especially as it's working. The bigger question perhaps is how he will handle his first crisis, when it happens.
Executive chairman Bill Ford told the BBC that Mr Mulally is a "hall of fame" chief executive.
"There are very few people that brought his skill set, his humility, and his humanity to the job," said Mr Ford.
Mr Mulally originally trained as an aeronautical engineer, and spent 36 years at Boeing, before he was approached by Bill Ford in 2006.
Mr Ford said he still remembered meeting Mr Mulally eight years ago.
"It was a fabulous first day - I look back at it now and realise we were finishing each other's sentences within an hour," he said, adding that Mr Mulally should be credited with changing Ford's culture to focus more on transparency and "dealing with reality".
However, he added that Mr Fields was more than up for the task of leading Ford.
Toughest jobMr Fields, who was passed over for the job in 2006 when Mr Mulally was appointed chief executive, joined the company as a market research analyst in 1989.
In 2000, he was made chief executive of Mazda - in which Ford owned a stake at the time - and was later head of Ford's European division.
However, Mr Ford emphasized that it was as the head of Ford's North American division that Mr Fields really proved his mettle.
"He took on the hardest job at the company," said Mr Ford, noting that as a young leader there were some who thought he would not be up for the task.
However, "he emerged as a leader and gained the trust of his team".
Seamless transitionFord has planned the leadership succession for a number of years, Mr Mulally said, and he brought forward his retirement as "everything is in place" for a "very orderly" transition.
"We are absolutely fully confident we are absolutely ready," he said in a conference call announcing the transition.
Mr Mulally will not retain a place on the board after retirement.
Analysts say that one can expect "more of the same" with Mr Fields in charge.
"Ford has had a renaissance under [Mr] Mulally, but [Mr] Fields has been there the entire time and has been his partner in this vision," Edmunds.com senior analyst Jessica Caldwell told the BBC.
"Ford knew [Mr] Mulally was not going to stay on forever - by partnering him up with someone who was already in the organisation, and someone they thought could be a leader, that the best thing they could do," she said.
"I can't imagine a better scenario."
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