Hoy, 36, is the first cyclist to carry a country's flag in the Olympics. He said the honor is "really is something special."
"I remember watching the opening ceremony at Sydney 2000 from our accommodation, because we were competing on the second day, and just being so excited by it," Hoy said in a release.
"I really hoped I would get the chance to be involved one day, so to get this opportunity is fantastic."
Hoy won a silver medal in the team sprint in the 2000 Games but won the 1-kilometer time trial in 2004 in Athens. Four years ago he was first in the keirin, sprint and team sprint.
He carried the flag at the Closing Ceremonies that year and was knighted several months later.
British Olympic officials drew up a list of nine possible flag bearers and submitted it to a panel of 31 athletics representing the entire team to decide on the Opening Games flag bearer.
Hoy is expected to race in the team sprint and keirin at this year's Games.