Sometimes dubbed "mini Merkel" by German media, Kramp-Karrenbauer, 55, is highly regarded in her party for winning an election in her region previous year that lifted the CDU's national standing ahead of a September 24 federal vote.
Leading Social Democrat mayors favor joining a coalition government with Chancellor Angela Merkel's conservatives, a poll showed Sunday, boosting the prospects of the center-left party backing the alliance, according to Reuters.
The appointment puts Annegret Kramp-Karrenbauer in pole position to take control of the party when Mrs Merkel eventually steps down or is forced from office.
Chancellor Merkel is arguably Germany's and the euro zone's, most successful political leader in recent history. But with the CDU reduced to only six ministries in the new coalition deal, her options to bring Ms Kramp-Karrenbauer into the cabinet were limited.
She's steered a steady and strong course through the euro zone financial crisis, albeit making austerity-promoting Germany unpopular with its indebted southern euro zone neighbors, and took the moral high ground at the height of the refugee crisis in Europe by allowing over 1 million refugees to enter Germany.
AKK said she would give up the Saarland premiership she has held since 2011. Amid a menacing SPD resurgence under Martin Schulz, her triumphant re-election didn't go unnoticed, as Merkel congratulated AKK, presenting her with a bouquet of flowers.
Ms Kramp-Karrenbauer said she had not taken the decision to accept the role easily.
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Almost five months after the national election, Germany is still without a federal government as the SPD consults its members before embarking on a re-run of their "grand coalition" with Merkel's conservative bloc.
A consistent Catholic and a mother of three, the Saarland politician is seen as an appeal to the more conservative members of the CDU, who have long hoped for change, the Frankfurter Allgemeine Zeitung suggests.
Kramp-Karrenbauer first caught the national spotlight last March, when she stormed to victory in a state vote seen as a test of Germans' mood just months ahead of nationwide polls.
An earlier attempt by Merkel to form a coalition with the liberals and Greens failed.
The SPD will vote on the coalition deal later this month with a result expected on March 4.
The outcome is considered wide open as the SPD's youth and left wings are fiercely opposed to another term governing in Merkel's shadow.
By appointing the up-and-coming AKK to a top role in the CDU, Dr Merkel is in part responding to critics who have been calling for fresh faces to reinvigorate the party after it suffered its worst electoral result since 1949 in September.