Byford, who becomes deputy to director general Greg Dyke, adds the role to his current responsibilities leading the global news division, the BBC World Service and BBC World.
The appointment gives him responsibility for all pre- and post-broadcast programme compliance and a new complaints procedure, which is being introduced following a review.
According to Dyke, the appointment of Byford was the most important of a number of changes being made.
"As a result of the review, we have decided to make a number of internal changes to modernise the complaints system and strengthen our post-broadcast compliance procedures. The most important of these is the appointment of a deputy director general who will take overall responsibility for this area."
He added: "This means the second most important person in the management structure will now have a particular responsibility for compliance and complaints."
The BBC has had to rejuvenate its complaints procedure to stave off suggestions that it should be regulated by Ofcom, rather than its board of governors.
"As a beacon of public service broadcasting around the world, the BBC must aim to provide brilliant, stretching and ambitious programmes. I will strive to promote high standards, quality and the upholding of the BBC's values in everything we do," Byford said.
The pressure on the corporation to update the system intensified following the Hutton Report into the death of Dr David Kelly, who committed suicide after he was implicated by BBC journalist Andrew Gilligan as accusing the government of "sexing up" its Iraqi dossier.
Two weeks ago, the BBC's governors met in Wales to approve the changes to the compliance and complaints system at the corporation.
At the time, chairman Gavyn Davies defended the role of the corporation's self-regulation system.
He said the 80-year-old governance system was in the public interest, although not necessarily politicians' or the BBC's commercial competitors'.
"The governors in September asked the director general and the executive committee to formulate proposals for reform in several key areas including the producers' guidelines relating to the breaking of controversial stories and to the use of anonymous sources," he said.
"Some of these areas were related directly to the Kelly affair. Others were not. All of them merited a re-think."
The review of the system was led by Caroline Thomson, director of policy and legal. As well as Byford's appointment, it has resulted in the creation of the role of controller of compliance, who will report into the deputy director general.
The editorial policy department, headed by former director of the Broadcasting Standards Commission Stephen Whittle, will also report into Byford.
At the same time, it was announced that Thomson would take responsibility for the BBC's charter review process, which will gain momentum over the next 12 months.
The appointment of Byford as deputy director general marks a high point in his long career with the corporation. He first joined the BBC 24 years ago as a graduate trainee.
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