Sir Nicholas will be replacing Sir Christopher Kelly and will work with chief executive Natalie Ceeney.
He is currently chairman of the Aviva UK Life With Profits committee and a director of the Pension Corporation.
He was formerly chairman of the board of the Inland Revenue.
Lord Turner, chairman of the FSA, described Sir Nicholas as a ‘customer-service champion’.
He said: “Nick has a distingushed career and brings a wealth of experience in demanding board positions. His predecessor, Sir Christopher Kelly, steered the Ombudsman Service through challenging periods and the next few years will be no easier.
“This role needs a customer-service champion to help shape the Ombudsman’s future role in the new regulatory structure and that is what we have with Nick.”
Sir Nicholas said: “I am delighted to have been appointed chairman of FOS. It is a strong and innovative organisation which over the last ten years has been recognised for increasingly significant role it plays.”