Former Standard Bank International CEO David Duffy has been appointed as the new CEO of AIB.
Mr Duffy will take up his post in AIB in December.
In a statement, the bank said his remuneration package will be in line with Government guidelines.
There is currently a €500,000 pay cap for executives at banks backed by the Government.
Mr Duffy, aged 50, has previously worked in Goldman Sachs and the ING Group.
The State has sunk about €20 billion into AIB and taken full ownership of the bank.
This time last year its then chief executive Colm Doherty stood down.
Since then the bank has been run by its Chairman David Hodgkinson.
He led the search for a new chief executive but warned about the impact of a restriction on bankers pay.
While Mr Duffy's pay will be within the salary cap, the bigger concern is job of work he faces to fix the badly damaged bank.
Mr Hodgkinson is to stay on the board as non-executive Chairman.
Minister for Finance Michael Noonan welcomed the appointment.
In a statement, he said: "I would like to thank David Duffy for accepting the position of AIB CEO and wish him well in the very important role of reinvigorating AIB.
"I note that he is the unanimous preferred choice of the board and brings a wealth of international banking experience from his work for a number of leading banks around the globe.
"Separately, I would like to thank David Hodgkinson for the leadership he has provided to AIB and am pleased that he is remaining on the board as non-executive Chairman.
"The Government is pleased that the remuneration policy set down by the previous Minister for Finance, Brian Lenihan, in capping the salaries of bank CEOs has been applied to this appointment.”
