The church's Holy Synod elected Metropolitan Theofilos in a 14-0 vote on Monday.
Church rebels had dismissed patriarch Irineos I earlier this year over the church's leasing of prime property in East Jerusalem to groups interested in expanding the Jewish presence there.
The long-term leases enraged the church's predominantly Palestinian flock, which claims East Jerusalem as the capital of a future state.
World Orthodox leaders stopped recognising Irineos' authority in May, but he continued to resist demands that he step aside, saying a former aide signed the leases without his knowledge.
Irineos was not immediately available for comment on Monday on the election of his successor.
Atalla Hana, a senior cleric at the Jerusalem church, said Theofilos "vowed yesterday and today before the synod and the religious men of the church to return all the properties that were leased to Israelis".
Greek media have reported that Theofilos, the metropolitan of Tabor in Galilee, had served previously as a Greek Orthodox Church envoy in Qatar and reportedly has close ties to the Greek Orthodox leadership in the United States.
Theofilos also apparently has support from clerics still loyal to Irineos, which could have helped to bolster his credentials as a compromise successor.
Dozens of worshippers shouted "well deserved" when the synod elected him patriarch in the Church of the Holy Sepulchre, Christianity's holiest shrine in Jerusalem.
Under church law, any new patriarch must be approved by the three governments under whose jurisdiction the church's flock lives.
The Palestinian Authority and Jordan have recognised Irineos' dismissal, but Israel has not.
Israeli officials were not immediately available for comment but Tel Aviv had previously said it would not work with Irineos' replacement.
Asked what the church would do if Israel refused to do business with Theofilos, Hana said the church was not interested in Israel's position.