Immigration Minister Chris Alexander says Dion is the ideal person for the job because of his deep knowledge of the legal system.
Dion, a former chairman of the National Parole Board, became public sector integrity commissioner in 2012. He announced his upcoming departure from that post in August, citing personal reasons.
The 58-year-old lawyer has more than 30 years in the public service, including a stint where he worked on the aboriginal residential schools settlement.
He is also a former legal adviser to a number of government bodies.
The appointment as chairman is effective Jan. 1 and is for a five-year term.
Dion's final report as integrity commissioner, issued Tuesday, was a sharp rebuke to the RCMP air service.
He said RCMP pilots produced phoney flight manifests in order to fly over-loaded aircraft, although he dismissed several other serious allegations from a whistleblower for lack of evidence.
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