The move comes as a surprise after many reports said interim CEO Ross Levinsohn had a lock on the top job.
Effective Tuesday, the appointment "signals a renewed focus on product innovation to drive user experience and advertising revenue for one of the world's largest consumer Internet brands," Yahoo! said in a statement.
"I am honored and delighted to lead Yahoo!, one of the Internet's premier destinations for more than 700 million users," Mayer said.
Danny Sullivan of the website Search Engine Land called Mayer a good choice to lead Yahoo!
"She is smart, she is driven, she knows the Internet space better than virtually anyone out there," he said.
"If anyone has a shot at doing something good with Yahoo! she is one of the best picks... She took Google as a search engine to this huge success that it has. She is very focused on details, very meticulous."
Marc Andreessen, the co-founder of Netscape and head of a venture capital firm, said the news is "great for the Valley" and "it's a big statement on Yahoo!'s part of go with a product-centric person."
"It can make Yahoo! a product innovator again," he told a tech conference organized by Fortune magazine in Aspen, Colorado. "There have been very few turnarounds in tech, until Apple proved you could do it."
At Google, Mayer was responsible for local and geographical products including Google Maps, Google Earth, Zagat, Street View, and local search for desktop and mobile.
She joined Google in 1999 as its 20th employee "and led efforts for many of Google's most recognizable products, including the development of its flagship search product and iconic homepage for over 10 years," the statement said.
She also "managed some of Google's most successful innovations, launching more than 100 features and products including image, book and product search, toolbar, iGoogle, Google News, and Gmail," according to the statement.
Mayer told The New York Times she "had an amazing time at Google" over the past 13 years, but that she opted to go to Yahoo! because it is "one of the best brands on the Internet."
Larry Page, CEO of Google, said in a statement that Mayer "has been a tireless champion of our users. She contributed to the development of our Search, Geo, and Local products. We will miss her talents at Google."
Levinsohn took over as interim CEO at Yahoo! in May when Scott Thompson was ousted in the face of controversy about an inflated resume.
Last week, shareholders endorsed the struggling Internet firm's overhauled board of directors and called for a fresh plan to compete against rivals such as Google and Facebook, but made no announcement about a chief executive.
Yahoo! has been trying to reinvent itself as a "premier digital media" company since the once-flowering Internet search service found itself withering in Google's shadow.
As the company strived for a new identity it saw an exodus of talent that commenced during a failed bid by technology giant Microsoft to buy Yahoo! four years ago for about $45 billion.
Yahoo!, which has lost ground against Google in search, has been cutting jobs in a purge aimed at transforming into a "smaller, nimbler, more profitable" company.
Fred Amoroso, Yahoo!'s board chairman, said board members "unanimously agreed that Marissa's unparalleled track record in technology, design, and product execution makes her the right leader for Yahoo! at this time of enormous opportunity."
Yahoo! co-founder David Filo said after the appointment of Mayer: "Marissa is a well-known, visionary leader in user experience and product design and one of Silicon Valley's most exciting strategists in technology development.
"I look forward to working with her to enhance Yahoo's product offerings for our over 700 million unique monthly visitors."
Mayer received a bachelor's degree in symbolic systems and her master's in computer science from Stanford University, specializing in artificial intelligence for both degrees.
She is credited as an inventor on several patents in artificial intelligence and interface design.
