The move, a step-change from DDB London's tradition of promoting from within, is designed to help the agency rejoin the UK's top five shops.
It is currently the 14th biggest agency in the UK, ranked by billings.
Hammersley, 41, takes the title of chairman and chief executive of the London agency. The appointment also sees DDB's current chief executive, Chris Cowpe, named as the vice-chairman, with a business development brief.
Chris Powell continues in his one-day-a-week advisory capacity.
Hammersley was most recently the chief executive of Lowe New York, but left the agency last summer when it merged with Bozell having lost its Heineken and Diet Coke business. Since then, he has been working on plans to launch a start-up agency in New York, which have now been called off.
The appointment marks the end of a year-long search for a new head for DDB London. The agency had considered and interviewed a wide range of senior agency figures including Tim Lindsay, Carl Johnson, Moray MacLennan, Tim Duffy, MT Rainey and the BBC's Andy Duncan.
James Best, DDB London's chief people officer and global strategic officer, said: "Paul is a class act by any definition, which is what this agency, its people and clients deserve. He has stature, intellect and energy that will help DDB London fulfil its highest ambitions.
"Paul's track record has been of good leadership, quality people and first-class places. He has maturity that means he can see the whole picture and is very knowledgeable about the business, as well as having the ability to lead an agency. He also possesses a passion for great creative to inspire an agency."
Hammersley made his mark on the London scene after he became the chief executive of the newly merged Lowe Lintas in 1999. A year later, wins including Orange and Merrill Lynch HSBC saw Lowe named as Campaign's Agency of the Year.
Hammersley said: "This is a fantastic opportunity. Running an agency of DDB's size, significance and reputation is something I'm very excited about."
DDB's standing in the UK market has weakened over the past few years following the loss of key domestic accounts including Vodafone, Barclaycard and British Gas.
Hammersley will take up his new role in mid-March.
- Perspective, p23.