Rubinstein, who was brought in as Palm's executive chairman when Elevation Partners bought a stake in the company in 2007, has appeared to be the frontman for the new Pre phone, appearing at industry conferences and touring retail outlets.
He will become chief executive on June 12, succeeding Ed Colligan, a 16-year Palm veteran who will take some time off and then join Elevation, Palm said in a statement.
Rubinstein has been a product guy, a consumer guy who gets what the product has to be, said Avian Securities analyst Matthew Thornton, adding that the change in leadership was not a complete shock to investors.
Shares of Palm rose 3.4 percent to $12.40 in after-hours trading, after falling 5.6 percent in Nasdaq trade.
Palm pioneered the market for handheld digital devices in the 1990s, but it has fallen behind competitors like Apple Inc
Rubinstein joined Palm in October 2007 after Elevation Partners bought a 25 percent stake for $325 million.
This has been their guy, said Thornton. From an execution standpoint, he's probably the guy they want to lead the next leg of growth.
Palm was early to the market for smartphones, which combine a cellphone and a personal digital assistant into one device, with its Treo product. But the company's products have fallen out of favor as RIM's BlackBerry and Apple's iPhone have gained share in the smartphone market.
The news of Rubinstein's appointment came days after Palm released the Pre on Saturday, considered the company's best chance to compete against Apple and its popular iPhone.
Shares of Palm have fallen this week amid concerns that sales of the highly anticipated new phone, which has garnered good reviews, may be hampered by supply constraints. Apple's price cut on its year-old iPhone could also hurt sales, analysts say.
(Reporting by Alexei Oreskovic; Editing by Richard Chang, Gary Hill)