Dillon, currently the AFL's executive general manager football operations, legal and integrity, as well as the organisation's general counsel, will take over from McLachlan on October 2.
AFL chairman Richard Goyder said Dillon was the "standout candidate" from a prolonged search which began when McLachlan announced in April last year he was quitting.
"(Dillon) is an exceptional football person. He has been a key leader in the AFL, he has been involved in every major decision of the AFL for many years," Goyder told reporters on Monday.
The chairman said there was "a field of high-quality candidates in what was a very, very competitive search process".
Among them were internal candidates Travis Auld and Kylie Rogers, who were on hand to witness Dillon's unveiling as McLachlan's successor at Marvel Stadium.
Richmond chief executive Brendon Gale and Western Bulldogs president Kylie Watson-Wheeler, the managing director of Disney Australia, were also linked to the role.
Dillon is the third consecutive internal appointment as chief executive after McLachlan and his predecessor Andrew Demetriou.
"I actually think it's a real positive in terms of what's been built here, the fact that Andrew (Dillon) is the right person to take us forward," Goyder said.
"That's why the transition will be seamless and I have no concerns whatsoever about how the transition will work.
"It's how things should work.
"The (AFL) commission did the right thing looking externally and judging all candidates against what we think is best-in-class criteria.
"But it's a hallmark of (McLachlan's) time and good management that within AFL House there's very strong successors."
Dillon rejected suggestions his appointment pointed to an AFL 'boys' club'.
"You only have to look at the calibre of our executive team and the calibre of my football, integrity and legal teams to say that there's no boys' club here," Dillon said.
"We've got a talented, diverse workforce and everyone's opinions are listened to and acted on.
"The more diverse the talent, the better the decisions you get, so I don't buy that one bit."
McLachlan, who has been CEO since April 2014, wanted to stand down at the end of last season but was urged to stay on by the AFL commission amid the search for a replacement.
Goyder said allegations of racism at Hawthorn which emerged last year, and the subsequent investigation, as well as ongoing talks around a 19th club licence in Tasmania, had delayed the appointment.
"There's been a few other things that have been a priority to the AFL which have been incredibly important to the game," Goyder said.
"I don't think we've lost any momentum over the period.
"The leadership Gill has showed has been exemplary through the period and the AFL is in great shape."
Dillion, describing his appointment as humbling, said his mission was to ensure "our game continues to expand its reach".
"I want to have footy in every home across the country," he said.
"We are going to make sure that football is the No.1 sport of choice for everyone all across Australia."
Dillon joined the league in 2000 as legal counsel and has since held several positions including general manager of areas including legal and business affairs, as well as national and international development.
His appointment has prompted a reshuffle in other senior management roles.
The current general manager of competition management, Laura Kane, will now be acting general manager of football.
And the incumbent general manager of legal and regulatory, Stephen Meade, will become the league's general counsel.
