The King accepted Mr Albanese's recommendation to appoint the 59-year-old business and community leader as the 28th governor-general.
She will also become the second woman to serve in the role.
"Sam Mostyn is an exceptional leader who represents the best of modern Australia," Mr Albanese said at Parliament House on Wednesday.
She will be sworn in as governor-general in July, taking over from current Governor-General David Hurley.
Sam Mostyn looks forward to representing the values, hopes and aspirations of all Australians. (Mick Tsikas/AAP PHOTOS)
"I'm deeply honoured by this great privilege and look forward to representing the values, hopes and aspirations of all Australians," Ms Mostyn said.
"I will never underestimate or take for granted the expectations that come with high office and I am ready to serve with integrity, compassion, and respect."
Ms Mostyn was appointed an officer of the Order of Australia in 2021 for distinguished service to business, the community and women.
She described herself as the daughter of an army officer and a beneficiary of the public education system, talking to reporters not far from the old Canberra hospital where she was born on Wednesday.
Ms Mostyn studied arts and law at the Australian National University, starting her career as an associate in the NSW Supreme Court of Appeal.
The same university awarded her an honorary doctorate of laws in 2018.
She has been on the board of companies and not-for-profits including Transurban and Virgin Australia and the chair of Citibank Australia, and currently sits on the Mirvac board while chairing AWARE Super and Alberts Music Group, as well as several not-for-profit boards.
She was the first woman appointed commissioner of the Australian Football League and a driving force behind the AFLW competition.
"Millions of Australians know this to be true, that being of service is what often provides a person with their greatest happiness and sense of purpose," Ms Mostyn said.
"That is certainly the case for me, and I can think of no greater purpose ... than to serve this country I love as governor-general."
The governor-general is the monarchy's representative in Australia and the nation's highest office.
They serve at the pleasure of the King, typically for a term of five years.
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