Wegg-Prosser leaves his role as publisher of Society Guardian late this month to start his new job in September. He will report to the PM's comms director, David Hill, in a role overseeing Number 10's strategic comms unit.
Wegg-Prosser was a special adviser to Mandelson before the latter's first resignation in 1998. He worked for the now European commissioner when he was was minister without portfolio and later trade and industry secretary.
He will replace Godric Smith, although the pair will work alongside each other for an 'initial period'.
The strategic comms team is one of three PR units at Downing Street, the other two being the day-to-day press office and a research and information department. It focuses on long-term media targeting.
Wegg-Prosser said: 'I am delighted to be returning to government after five great years at The Guardian.'
Two months ago former Labour PR man Tim Allan declined an offer to return to Downing Street in a role similar to that accepted by Wegg-Prosser because he would have been obliged to sell his firm, Portland PR (PRWeek, 3 June).
Shadow Commons leader Chris Grayling attacked Wegg-Prosser's appointment: 'It is wrong to replace a well-regarded civil servant in a senior role in government with a long-standing New Labour crony.'