43-year-old Mistry was a director of Tata Sons and Tata Elxsi (India).
Ratan Tata retires next year when he turns 75. He joined the Tata group in 1962 and has been the Chairman since 1991.
Endorsing the appointment, Mr Tata said, "The appointment of Mr. Cyrus P. Mistry as Deputy Chairman of Tata Sons is a good and far-sighted choice." (Read: Press release from Tata Sons)
"I will be committed to working with him over the next year to give him the exposure, the involvement and the operating experience to equip him to undertake the full responsibility of the Group on my retirement," Mr Tata added.
Mr Mistry said he was deeply honoured by his appointment. "I am aware that an enormous responsibility, with a great legacy, has been entrusted to me," he said in a statement.
He announced that he will legally dissociate himself from the management of his family businesses to avoid any issue of conflict of interest. Shapoorji Pallonji Mistry, the father of the new deputy chairman, owns 18 per cent stake in Tata Sons. The Shapoorji Pallonji Group is into construction, textile, water treatment and other businesses. Cyrus Mistry is currently the managing director of the two billion dollar SP Group.
Born on July 4, 1968, Mr Mistry graduated from the Imperial College, London with a BE in civil engineering. He also holds a masters degree in management from the London Business School, and is a fellow of the Institution of Civil Engineers.
Apart from the Tata Group, he also serves as a director on the board of several other companies, including Shapoorji Pallonji & Co, Forbes Gokak, Afcons Infrastructure and United Motors (India).
Mr Mistry was also a part of a search panel appointed last year to find Mr Tata's succesor. He withdrew himself when his name was suggested. He then entered the process as a candidate.
The 5-member panel also comprised of N A Soonawala, vice-chairman, Tata Sons; R K Krishna Kumar, non-executive director, Tata Sons; Lord Bhattacharya, a businessman based in the UK who runs Warwick Manufacturing; and Shirin Bharucha, a lawyer for the group. The committee is said to have met 18 times before announcing the succession plan.