The company on Thursday said that Americas President Mark Fields has been named chief operating officer effective Dec. 1, with all of the company's business units reporting to him.
Fields will report to Mulally, 67, who will stay on to lead the company's long-term strategy.
Mulally is highly respected at Ford for saving the company from financial collapse. Shortly after he was hired away from Boeing Co. in 2006, he mortgaged all of Ford's assets for a huge loan. The $23.5 billion loan paid for a restructuring and helped keep Ford out of bankruptcy protection.
Starting in December, Fields will lead all three of the company's automotive businesses: The Americas, Asia Pacific, and Europe, Middle East and Africa.
It was unclear when exactly Mulally will step down.
"Whatever happens, Alan is here two more years, but we could go longer," Executive Chairman Bill Ford Jr. said Friday on a conference call.
In addition, the company named Joe Hinrichs, now group vice president of the Asia Pacific Africa unit, to replace Fields as head of The Americas.
Hinrichs, who ran Ford's manufacturing operations before heading to Asia, had been among the candidates to replace Mulally.
Stephen Odell, group vice president in Europe, was named executive vice president and president of Europe, Middle East and Africa. He also was among the candidates to succeed Mulally.
"Today marks an important next step in the profitable growth of the Ford Motor Co. and the appointment of key leaders who will help us continue to make progress," Executive Chairman Bill Ford Jr. said in a statement.