It comes after a failed martial law attempt in December that led to the impeachment of ex-president Yoon Suk Yeol.
Veteran lawmaker Ahn Gyu-back is "the first civilian to lead the ministry in 64 years", said presidential Chief of Staff Kang Hoon-sik at a news conference on Monday.
"He is expected to push reforms in the military, particularly in response to its involvement in the martial law," he added.
During his election campaign, President Lee Jae Myung had promised to appoint a defence minister from the "civilian circle," responding to widespread public calls for control of the military in the wake of the martial law crisis.
South Korea's former president Yoon was impeached and suspended by lawmakers over his December 3 attempt to subvert civilian rule, which saw armed soldiers deployed to parliament.
Kim Yong-hyun, who served as defence minister under Yoon, has been under arrest since December and is currently on trial for insurrection, accused of recommending martial law to the former president and drafting the decree.
Previous liberal administrations have attempted to appoint a "civilian" defence minister, but have failed to do so, many citing the growing threat of North Korea's nuclear programme.
Ties between the two Koreas deteriorated under the hardline administration of the hawkish ex-president.
They technically remain at war because the 1950-53 conflict ended in an armistice, not a peace treaty.
Lee has vowed to improve relations with the North and reduce tensions on the peninsula, halting the loudspeaker broadcasts Seoul had begun last year in response to a barrage of trash-filled balloons flown southward by Pyongyang.
In response, a day after, North Korea stopped broadcasting strange and unsettling noises along the border which the ministry hailed as "a meaningful opportunity to ease inter-Korean military tensions and restore mutual trust."
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