Kerslake will take on the role alongside his existing position at the DCLG when Sir Gus O'Donnell retires at the end of this year.
O'Donnell is currently cabinet secretary as well as head of the civil service, but his role is to be split into two when he leaves. Jeremy Heywood, who is currently the permanent secretary at 10 Downing Street, will become cabinet secretary.
Kerslake won many plaudits during his time as chief executive of housing and regeneration quango the Homes & Communities Agency, which he left in 2010. Prior to that he was chief executive of Sheffield City Council.
Kerslake said: "I am delighted and honoured to be given this leadership role at such an important time for the civil service.
"We have immense strengths in the service that we should be justly proud of, but we must also embrace change. I want to engage all parts of the civil service in the reform process."
Prime Minister David Cameron said: "Sir Bob brings with him a wealth of experience in both central and local government gained from over 20 years of public service."