Ireland coach Declan Kidney has turned to Munster lock O'Connell in the absence of regular skipper Brian O'Driscoll, who will miss the entire tournament as he recovers from shoulder surgery.
O'Connell was captain of the 2009 British and Irish Lions in South Africa, and he will take the Ireland reins for their Six Nations opener against Wales in Dublin on February 5.
The Ireland squad began preparations for the championship on Friday with a two-day training camp near Dublin.
Current Munster captain O'Connell has led his country in the past, initially against France in 2004, and also when Ireland played England during their World Cup warm-up series four months ago.
O'Connell said: "The greatest ambition in a player's career is to play for your country, so to captain Ireland is a huge honour for me and I was delighted when Declan asked me to.
"I have been lucky to have played for my country on 82 occasions, and during that time I have always felt that the responsibility of leadership should not just rest on the shoulders of Brian and that the senior players are incredibly important.
"We are lucky in the Ireland squad that we have a couple of outstanding leaders across the pitch, and I know that I will be relying on them during the championship.
"I think the squad is in a good place at the moment with the majority of the provinces going well in Europe and in the RaboDirect PRO12.
"So it's a case of players continuing to play well to get themselves into a position to be selected in that first squad, and then working hard for what I think will be an ultra-competitive Six Nations.
"It was good to come back together for the first time since the World Cup, and I am now just looking forward to February and to the challenge of the championship."
Kidney added: "With Brian (O'Driscoll) on the rehab trail at the moment, we knew that we had to plan for the captaincy and felt that it was fitting that we announce it at the Christmas camp in front of the squad.
"There are a number of players with strong leadership credentials in the squad who have always been supportive of the captaincy and will be important during the championship.
"Paul has always been one of those leaders in the squad, and I was delighted that he accepted the honour and the responsibilities that it brings.
"I know that he will bring through his experience to the position in the championship."
Ireland's first Six Nations game is a rematch of their recent World Cup quarter-final against Wales in Wellington, when O'Connell and company made a quarter-final exit.
After Wales, Ireland face France in Paris, then host Italy and Scotland before finishing the tournament with a Twickenham appointment against England on March 17.
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