Grade will take up his position in January, as Camelot is set to begin its second stint running the lottery. He replaces Sir George Russell.
In a statement, Grade said, "I look forward to working with my colleagues on the board and Camelot's committed workforce to meet the challenges that lie ahead." He joined the board of Camelot last year.
He said his priority was increasing lottery sales and returns to good causes.
Camelot beat off a challenge from Sir Richard Branson to win the licence to run the lottery for a second time, but it had to fight the Lottery Board's initial decision.
In January, Camelot aims to have completed the installation of 25,500 new lottery terminals around the country.
Grade was chief executive of Channel 4 from 1988 to 1997, and is currently executive chairman of Pinewood and Shepperton Studios and chairman of the Octopus publishing group. He was also controller of BBC1 during the 1980s, and a member of the board of the New Millennium Experience Company, which ran the Dome in Greenwich.
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