James O'Brien will serve in the new role created to boost efforts "to safely recover American hostages abroad," it said in statement.
It follows criticism over how the government handles hostage situations after a number of deaths this year.
In June, the White House gave families permission to make ransom payments.
Until that point, the US government had the power to threaten them with prosecution if they tried to pay their relative's captors ransom - although to date the Justice Department has never followed through on this threat.
President Barack Obama's administration has drawn criticism for its long-standing policy of prohibiting concessions to militant groups.
It has also come under increasing pressure since it was revealed some European governments had been paying Islamic State (IS) militants to free their nationals abducted in Syria and Iraq.
The family of US journalist James Foley, who was beheaded by IS a year ago, said they felt they had no-one "accountable for Jim" during the time he was being held hostage.
The father of Kayla Mueller, an American aid worker who died whilst held in IS captivity in February, has also expressed frustration with US policies regarding hostages.
"They put policy in front of American citizens' lives," Carl Mueller told NBC Today, two weeks after his daughter's death was confirmed.
The policy changes announced two months ago said the administration needed to enhance its focus "on diplomatic efforts to ensure the safe return of American hostages to their families".
In a statement released on Friday, the White House said Mr O'Brien was "uniquely qualified to serve in this position given his extensive background in diplomacy and international negotiations".
Mr O'Brien, a former special presidential envoy for the Balkans, has been instructed to work directly with families of hostages and help synchronise efforts to to secure the release of their family members.
The White House has appointed its first presidential envoy for hostage affairs as part of the US government's review on responding to hostage situations.