Olaf Scholz, 59, the interim leader of the Social Democrats (SPD), will take over the powerful finance ministry which in recent years was led by fiscal hawk Wolfgang Schaeuble of Merkel's Christian Democrats (CDU).
Meanwhile Heiko Maas, the SPD's outgoing justice minister, will take the prestigious post of running the foreign ministry.
The announcements were made by Andrea Nahles, the designated next leader of the centre-left party.
Both Merkel's conservative CDU/CSU bloc and the SPD, the two mainstream parties of Europe's biggest economy, lost millions of votes to far-right populists in last September's elections.
This has forced them, after six months of torturous negotiations involving multiple parties, into another unhappy marriage of convenience dubbed a grand coalition or "GroKo".
Merkel, in power for 12 years, is due to formally launch her fourth-term government next Wednesday.
But unrest is brewing within her party following a historically poor election result and Merkel's decision to give up key cabinet posts as the price of holding onto power.
Given the mutual distrust and looming challenges, "it's possible that this coalition won't last four years," one senior CDU source has told AFP. "Unlike in the past, I'm not sure this time."
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