The move was widely expected and signals the investment bank will keep its focus on businesses such as merger advisory and restructuring, analysts said.
Jacobs, 51, has been with the firm for more than two decades and is an experienced dealmaker.
Ken is very smart, said Felix Rohatyn, a former Lazard executive who worked with the firm for more than four decades. He works very hard ... I don't know that you can ask for more.
Lazard shares were up 1.3 percent to $40.18 in morning trading, and options traded briskly as investors cheered the move.
Jacobs takes over a business that has performed relatively well during the economic downturn, as companies have grown increasingly interested in independent advice.
Lazard ranks sixth among merger advisers so far this year, up from 10th at this time last year, according to Thomson Reuters global mergers and acquisitions league tables.
Jacobs joined Lazard in 1988 and was named a partner in 1991. He became deputy chairman in 2002. He has worked on transactions for clients including GlaxoSmithKline and IBM, even as he has risen to increasingly senior posts.
The key to Lazard is you have to be a player-coach, Jacobs said in a 2006 interview with BusinessWeek. You have to have clients and be involved in big transactions. Otherwise, you get no respect.
Jacobs played a key role in keeping the firm together through tumultuous times, and was likely chosen for the CEO spot because he provides a bridge to the days when Lazard was a private partnership, said William Cohan, author of the Lazard history The Last Tycoons.
Wasserstein turned Lazard from a partnership legendary for its private fiefdoms and infighting into a public company.
Jacobs has always been there for Lazard through all the upheavals the firm has had during the last ten years, Cohan said. He has always been the guy behind the scenes holding the firm together.
Demand for call options, which perform well if a stock rises more than expected, was strong in the morning, according to options analytics firm Trade Alert, with volume at more than double its average daily level.
This is a bullish play based on change of leadership in Lazard, said Joe Kinahan, chief derivatives strategist at TD Ameritrade. It seems as though it was the right move, judging by the initial reaction to both stock and options.
Lazard's board picked Jacobs unanimously. In a lengthy announcement that listed several leadership changes, Lazard said Steven Golub, interim chief executive since Wasserstein's death, will continue as Lazard vice chairman and chairman of its financial advisory group. Golub had been considered a candidate for CEO.
Deputy Chairman Gary Parr, also considered a CEO candidate, will become director and vice chairman. There was some doubt about whether Parr, a prolific dealmaker, wanted the job of CEO.
Lazard also announced Tuesday that Ashish Bhutani, who is CEO of Lazard Asset Management, will become a director and vice chairman.
Steven Heyer, a director since Lazard's initial public offering in 2005, will become lead director, a new board position.
Antonio Weiss was named global head of investment banking.
Jacobs takes over at a time when Lazard has seen dramatic growth in its restructuring business. But as global merger activity has slowed, revenue from advising on acquisitions has decreased.
Lazard posted $279.3 million in restructuring revenue for the first nine months of 2009, up from $72.1 million in the same period last year. Merger advisory revenue dropped to $356 million from $622 million.
(Reporting by Steve Eder; Additional reporting by Elinor Comlay in New York and Doris Frankel in Chicago; editing by John Wallace)