Tamir Pardo, twice deputy director of the Mossad, will replace hard-charging former army general and black operations specialist Meir Dagan, who has run the agency since 2002.
Dagan is due to retire in December after eight years in which he revitalized a service demoralized by failures and internal turf wars, and pulled off a series of intelligence coups.
These are believed to include the assassination of Palestinian, Lebanese and Syrian leaders as well as Iranian nuclear scientists. One was killed in a daylight bombing in Tehran Monday and another was wounded. Authorities blamed Israel for those attacks.
Pardo, who unlike the veteran Dagan is a little-known figure because of his undercover work, took part in the 1976 Israeli commando raid on Entebbe, Uganda, to rescue hostages seized aboard an Air France jetliner.
Netanyahu's brother Yonatan, the raid commander, was the only Israeli fatality in that famed long-range operation. Pardo was a close confidant of Yonatan, who at the time commanded the elite Sayeret Matkal commando unit.
Pardo, who was formerly identified only as 'T', resigned as deputy director in 2009 after Dagan refused to designate him as his successor. However, Pardo's views, particularly regarding Iran and how its nuclear plans should be torpedoed, are said by insiders to be close to Dagan's, and that Netanyahu wants Mossad to continue that policy.
Still, insiders believe the international furor caused by the Jan. 19 assassination of Hamas chieftain Mahmoud al-Mabhouh in Dubai after authorities there publicly blamed the Mossad reflected badly on Dagan.
Meantime, the Mossad has been accused of involvement in the unsolved death of German politician Uwe Barschel in October 1987 after he had threatened to expose illegal arms sales by Israel to Iran, a deal reportedly conducted through Germany.
Barschel, a Christian Democrat who was governor of Schleswig-Holstein state, was found dead in a Geneva hotel from a lethal dose of barbiturates.
Swiss police called it suicide, but a toxicologist involved in the case now says he has evidence Barschel was force-fed a cocktail of drugs.
That killing bore a striking resemblance to the assassination of Mabhouh. Dubai police initially thought he had died of a heart attack, when in fact he was fed drugs and suffocated with a pillow.
Under the command changes, Israel's most sweeping shuffle of its top military and intelligence echelons, virtually every senior officer will be replaced because their appointments have expired.
According to most estimates, the changeover, a process likely to continue until February, will include more than 200 of Israel's most senior officers, all the way down to battalion level.
Analysts say a move on such a scale would not have been undertaken if an Israeli pre-emptive attack on Iran's nuclear infrastructure was imminent.
But Jane's Defense Weekly recently quoted a senior Israeli officer as saying: "A changeover of this scope and within such a short time is dangerous for the country.
"At a time when war could break out with Hezbollah and Hamas and decisions need to be taken on Iran, it is irresponsible to replace all of the military and intelligence chiefs in the country within such a short time span."
This wholesale changing of the guard is being conducted at a time when Netanyahu and Defense Minister Ehud Barak, Israel's most decorated military hero, have come under intense criticism from within the military for their policies, and when the Middle East is seething with tension, seemingly ready to explode into a series of interlinked conflicts.
The new commanders will determine to a large extent the direction Israel's military and intelligence community will take at a time of potential great change in the Middle East and within Israeli society.
Barak appointed a new chief of staff, who will hold office for three years, on Sept. 5, six months ahead of schedule, underlining his drive to condense the command handovers into as short a timeframe as possible.
Lt. Gen. Yoav Galant, a 33-year army veteran who was head of the army's Southern Command, will take over in February to succeed Lt. Gen. Gabi Ashkenazi.