Chancellor George Osborne has hailed Christine Lagarde's appointment to head the IMF as "good news for the global economy and for Britain".
The French former finance minister was a "strong advocate for countries tackling high budget deficits and living within their means", according to the Chancellor.
The widely-expected announcement, made by the international body, comes after Dominique Strauss-Kahn was forced to quit amid allegations that he sexually assaulted a hotel maid.
Mr Osborne said: "Christine Lagarde's appointment as Managing Director of the IMF is good news for the global economy and for Britain.
"She is the best person for the job, which is why Britain was one of the first countries to propose her and I am pleased she's secured the support of others."
He went on: "She has demonstrated she has the experience, vision and diplomatic skills necessary to ensure the IMF can address the challenges it faces.
"She has also been a strong advocate for countries tackling high budget deficits and living within their means."
Ms Lagarde, 55, is the first woman handed the IMF's top job since the body was created in 1944.
Her victory over Mexican central bank chief Agustin Carstens was all-but assured earlier today when the US declared its support.
She must now steer the IMF through one of the most turbulent periods in its history, with the Eurozone in crisis and fallout from the Arab Spring.
