Grade will join the ITV board in early 2007 and will succeed Sir Peter Burt. The move comes as ITV continues to search for a chief executive officer to replace Charles Allen, who left the company in October.
His appointment was a huge surprise to the City and the BBC and his profile appointment will bolster ITV and help to restore confidence in the broadcaster.
It comes just after NTL's £5bn takeover bid of ITV collapsed following the interjection of BSkyB, which snapped up 17.9% of ITV's shares for £949m.
Grade will become executive chairman and John Cresswell, the interim chief executive officer, will become chief operating officer and finance director suggesting the appointment of a new chief executive is close.
It is the ITV board's intention that this arrangement should remain in place for up to three years. Within that time, Grade and the board expect to appoint a chief executive with Grade stepping back from day-to-day management to become non-executive chairman.
Grade leaves the BBC after just two-and-half years into a four-year stint as chairman. He replaced Gavyn Davies, who lost his job along with director-general Greg Dyke on the back of the Hutton affair.
He will be replaced in the interim at the BBC by vice-chairman Antony Salz, who becomes acting chairman with immediate effect.
Grade, 63, has a strong media heritage, having been chief executive at Channel 4. He comes from a show business background -- his uncle Lord Lew Grade was one of the pioneers of ITV.
He has also held the posts of director of programmes at London Weekend Television and BBC Television, as well as heading the merged Pinewood and Shepperton studios. Grade applied for the BBC chairman's role in 2001 but the then vice-chairman Davies was selected. Grade will continue as non-executive chairman of Pinewood Shepperton and Ocado.
Burt did not underestimate the challenges that Grade faces in his new job and said that these centred particularly on the programming and advertising side. He called them considerable.
He said: "Michael's particular blend of skills will provide both the continuity of experienced media management and the creative leadership which ITV needs to move forward rapidly. I regard it as a real coup to have persuaded Michael to join us."
Grade said his first priority at ITV would be to support the team in accelerating the improvement in "programming performance for our viewers and advertisers".
He said: "It has been a tough career decision to leave the BBC but it was an opportunity I could not resist, given my family's history in the founding of ITV and my own background at London Weekend Television."
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