Merrett was voted into the role after Dyson Heppell made the surprise decision to step aside last week.
Defender Andrew McGrath has been appointed vice-captain.
Heppell skippered Essendon in 107 matches, placing him fifth on the club's all-time list for games captained.
Merrett's appointment means the Bombers will enter 2023 with a new captain, coach, chief executive, president, high-performance manager and board members.
Essendon have been mired in mediocrity for much of the past two decades, with their last finals win coming in 2004.
They finished 15th last season in a campaign that resulted in the axing of coach Ben Rutten and a botched attempt to snare Alastair Clarkson as his replacement.
Merrett is one of the game's best midfielders, winning two All-Australians and three best-and-fairest awards.
The 27-year-old, who served as vice-captain last season, is determined to lead the club into an era of success.
"There's great energy around the group," Merrett said.
"With Andy and I as captains, supported by a group of emerging leaders, we are all united and aligned in our vision to take us back to being a successful football club.
"This is a journey for all Essendon people – we're bringing everyone along for the ride and we are working really hard to make our members and supporters proud of this team again.
"It is a huge honour to be selected as the next captain of Essendon.
"Some of the finest names in Australian football have been captains of Essendon. From Reynolds to Clarke, Daniher, Hird and Heppell, it's humbling to join this list of champions of Essendon.
"This is a great club with a great future."
New coach Brad Scott said Merrett was the perfect leader to take the young group forward this season.
"This is an exciting time for our football club as change presents opportunity," Scott said.
"Zach and Andy are outstanding leaders who will progress this football club setting and demanding high standards."
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