With Macqueen moving upstairs as director of coaching, Hill steps up from his current role as assistant coach into the top job.
Hill boasts an outstanding coaching pedigree, having led Sydney University to three consecutive premierships before heading south to learn under the 1999 World Cup-winning mentor this season.
"I am grateful for the confidence that the board of the Rebels has shown in confirming our succession plan for coaching," Hill said.
"This is the next step for me and I am fortunate to have the ongoing support of Rod."
Macqueen has backed Hill to follow on the hard work laid during a testing inaugural season highlighted by just three wins from 15 matches and the wooden spoon.
"When selecting the coaching staff we always had succession planning in place," Macqueen said.
"Damien is very respected by peers and players alike, and he strongly reflects the culture that we are endeavouring to build at the Rebels."
Macqueen's final match in charge will be Friday night's home game against Western Force at AAMI Park.
Rebels chairman Harold Mitchell believes the club is well placed to cope with the transition.
"The succession plan which was put in place when Rod Macqueen agreed to lead the Rebels almost two years ago was always about setting the club up for the long term," Mitchell said.
"Rod has been unrelenting in his commitment to the foundation phase of our club.
"He has led our organisation with enormous passion, on and off the field, and his influence and leadership is now indelibly part of what we are forever.
"The Rebels and Rod Macqueen are synonymous with each other and our sincere hope is that Rod is not only with us for the next few years, but for many more to come."
Mitchell added Macqueen had been extended an invitation to join the Rebels board.
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