Donald, a 44-year-old Englishman, represented Europe in four Ryder Cups as a player. He was part of the winning team each time, including the 'Miracle at Medinah' in 2012.
He was also a vice-captain in the last two editions of the biennial contest, under Thomas Bjorn in 2018 and Padraig Harrington last year.
"I am incredibly proud to be named European Ryder Cup captain for 2023," said the former world No 1.
"It is truly one of the greatest honours that can be bestowed upon a golfer, to lead a team of your peers and be an ambassador for an entire continent. I feel extremely privileged to have been given that responsibility and it is a responsibility I do not take lightly."
Team USA hold the Ryder Cup following their comfortable 19-9 victory at Whistling Straits in Wisconsin last year. The 2023 competition will be held in Guidonia, just outside Rome, in 2023, the first time the cup will be contested in Italy.
"Some of my best experiences in golf have been in the Ryder Cup and I would not swap those for anything," said Donald.
"It is an event like no other and I cannot wait to create more special memories in Italy next year.
"I love everything the Ryder Cup embodies, from the camaraderie and companionship of being part of a team, to the history of the contest, but most of all playing for something bigger than yourself.
"Rome will be a fantastic host city. It is a city rich in history and hopefully we can create some of our own in 14 months' time."
LIV Golf has disrupted both tours, which have suspended players for signing on with the rival league. Among the Ryder Cup players for Europe who joined the LIV Golf Series are Lee Westwood, Ian Poulter, Sergio Garcia and Paul Casey. Then again, all are in their 40s and qualifying for Europe has not yet begun.
Zach Johnson is the US captain. The American team from Whistling Straits has lost Dustin Johnson, Brooks Koepka and Bryson DeChambeau. They all have gone at least 16 months since their last win.