Nooyi, 50, will succeed the 58-year-old Steve Reinemund on October 1st, although Reinemund will keep working for the company until May of next year.
A Madras native and graduate of the Yale School of Management, Nooyi said she was "humbled" to be chosen as CEO by the PepsiCo board after serving since May 2001 as president and chief financial officer.
"Steve has steered the company to a strong and enviable position, and he will be a continuing source of wisdom and perspective," she said in a PepsiCo statement.
"I am equally fortunate to have amazing partners, not only on the board and executive team, but in the 157,000 bright, talented colleagues around the world who deliver the results every day and are as committed as I am to continue capturing every growth opportunity.
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Reinemund said he was retiring to spend more time with his family.
"It was, in many respects, the toughest and easiest decision of my life," he said.
Nooyi will join an exclusive list of women CEOs of top US comp