Rae, 56, is expected to take up his assignment shortly, an announcement said. He is currently the Indian ambassador in Vietnam.
Rae is one of the architects of the 12-point agreement signed in 2005 in New Delhi between the then seven-party alliance and the Communist Party of Nepal-Maoist that led to the peace process in Nepal.
He was the joint secretary in the ministry of external affairs and looked after the Nepal/Bhutan Desk from 2002 to 2006.
Rae played a key role in formulating India’s two-pillar Nepal theory – that New Delhi would support both multi-party democracy and constitutional monarchy – after Gyanendra Shah took absolute power in 2005.
Rae also served in the Permanent Mission of India in New York, the UN Mission in Kosovo, and the Department of Peace Keeping Operations of the UN in New York.