Levin replaces Charles Rangel, D-N.Y., who stepped aside Wednesday as chairman while the House ethics committee investigates his fundraising and finances.
Rep. Fortney "Pete" Stark, D-Calif., held the acting chairmanship for a day under House rules, but Speaker Nancy Pelosi told a meeting of all House Democrats Thursday that Levin was the choice to run the committee.
He will serve until Rangel's ethics case is resolved or a new Congress convenes next year. Stark will remain chairman of the Ways and Means health subcommittee.
Levin told reporters: "I think you know my close relationship with Charlie. At this point, I'm acting chairman."
Rangel, who has said he didn't want his ethics case to damage fellow Democrats, said, "It's the best thing for the country, the Congress and the committee under the circumstances. I love him. He's good. He's thorough. He's got a reputation, and he'll do us well."
Levin, 78, who represents an auto industry district outside Detroit, is the Democrats' foremost expert on trade issues and a key player on tax legislation. Currently, he also heads the Ways and Means trade subcommittee, where he has pushed for strong provisions to protect worker rights in any trade deals.
Levin was first elected in 1982 and is in his 14th term. He is the older brother of Sen. Carl Levin, D-Mich., chairman of the Senate Armed Services Committee.