Mr Ramos-Horta will take up the post on 31 January, a UN statement said.
He will take over from Rwandan diplomat Joseph Mutaboba.
The military seized power of the West African nation in a coup in April, and instability has turned the country into a prime drug smuggling spot.
The UN Security Council has demanded that Guinea-Bissau’s rulers restore constitutional rule.
Gangs use the country to smuggle cocaine from Latin America to Europe, allegedly in collusion with top army officers.
Guinea-Bissau has a long history of coups since independence from Portugal in 1974, and no elected leader has finished their time in office since.
Mr Ramos-Horta, 63, was president of East Timor from 2007 until he lost a re-election bid in 2012. He shared the Nobel prize in 1996 for working towards a peaceful solution to the conflict in East Timor when it was under Indonesian rule.