The selection of Hamdallah was welcomed by the United States.
U.S. Secretary of State John Kerry congratulated him, saying his appointment "comes at a moment of challenge, which is also an important moment of opportunity."
"Together, we can choose the path of a negotiated two-state settlement that will allow Palestinians to fulfill their legitimate aspirations, and continue building the institutions of a sovereign and independent Palestinian state that will live in peace, security, and economic strength alongside Israel," Kerry said in a statement.
"We also recognize the extraordinary contributions of outgoing Prime Minister Dr. Salam Fayyad, who has worked tirelessly to build effective Palestinian institutions."
Voice of America reported Abbas asked Hamdallah, an English professor who is president of Al-Najah University in Nablus, to form a new Palestinian Cabinet in the West Bank as Fayyad, who announced his resignation in April, leaves office this month.
VOA noted Hamas, which controls the Gaza Strip, has rejected the appointment. A spokesman for the militant Islamic group called Hamdallah's selection "illegal" and said it not facilitate Palestinian unity.
Hamas and Abbas' Fatah party agreed in principle last month to form a unity government. The two factions have been feuding since 2006.