She replaces Beverley Hughes, who resigned earlier last week.
Ed Balls, who had been widely tipped to replace Alistair Darling as Chancellor, is staying in his post as Secretary of State for Children, Schools and Families.
Ms Primarolo, who is the MP for Bristol South, had been public health minister since 2007.
She had held various Treasury posts since 1994 and was Paymaster General from 1999 to 2007.
Ms Primarolo, who recently took part in celebrations for the 3,000th children's centre opening, said she was delighted. 'I am looking forward to driving forward policies that make a real difference to the support, advice and resources available to children and families.'
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