Rao, a 1973-batch IFS officer who has served in a number of key positions, will be the second woman Foreign Secretary of India after Chokila Iyer.
Prior to her posting in Beijing as Ambassador in October 2006, the 58-year-old seasoned diplomat had served as Indian envoy to Sri Lanka and the country's first woman spokesperson.
Earlier, she had served in the Indian Missions in Washington and Moscow besides having a stint in the Ministry of External Affairs as Joint Secretary (East Asia).
She will be taking over as the top diplomat at a time when India's relations with Pakistan are going through tough times in the aftermath of Mumbai terror attacks.