Qantas chief financial officer Vanessa Hudson, who has had spent nearly three decades with the airline, will take over from Mr Joyce in November.
Airline chairman Richard Goyder said Mr Joyce had wanted to retire earlier but stayed in 2020 at the board's quest to lead the airline through the COVID-19 pandemic, the most difficult period in Qantas' history.
He said Ms Hudson, the airline's chief financial officer, knew the business incredibly well and had shown the skills needed to take on the "uniquely challenging role".
With travel resumed, Qantas has reduced its debt from a peak of $5.8 billion to $2.4 billion and began a $500 million share buyback in February.
"It's a pretty amazing turnaround that Alan has led us through and we feel very confident about where the airline is placed at the moment," Mr Goyder said.
Ms Hudson said she would be focused on delivering for Qantas' customers, employees and shareholders when she assumed the top job at the airline.
"I am so passionate about Qantas. I've worked for Qantas for 28 years. And that excitement of the first day that I felt working into Qantas, I still feel today," she said.
She was selected from a field of close to 40 external candidates, but ultimately the board's decision came down to a choice between her and another internal candidate, Qantas Loyalty head Olivia Wirth.
Ms Hudson said she was very proud of being the airline's first female chief and it had been incredibly meaningful to her listening to the reflections of her 21- and 18-year-old daughters ahead of Tuesday's announcement.
Mr Joyce said there were few female chief executives in the worldwide aviation industry and her choice was a credit to the business.
"It's a credit to the country that a gay Irishman was appointed 15 years ago to be CEO of the company and now we have the first female," Mr Joyce said.
RBC Capital Markets analyst Owen Birrell said Ms Hudson was the logical choice as the most suitable candidate.
"She has been involved in developing group strategy for the last five years and also led the fleet selection process in 2022 for the renewal of the domestic jet aircraft fleet," he said.
Her job as the airline's chief financial officer since October 2019 will have prepared her well for the "very public" role as Qantas CEO, he added.
Mr Joyce took the helm at Qantas in November 2008 after previously heading its budget subsidiary, Jetstar.
His tenure attracted controversy for his battles with unions, including over the 2020 decision to outsource the jobs of about 1600 ground crew.
The Federal Court found the pandemic-era move was illegal, a decision the airline has appealed to the High Court.
More recently, Mr Joyce and Qantas have been criticised for lost baggage and widespread flight disruptions, problems blamed on the airline's job cuts - although the carrier says the issues are industry-wide.
At 11.29 am AEST, Qantas shares were down 2.4 per cent to $6.58.
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