The MP for Saffron Waldon joins the Department for Education after Zahawi left to become a minister in the Department for Business, Energy and Industrial Strategy in Prime Minister Boris Johnson's reshuffle.
Zahawi, who set up the market research firm YouGov, was in post at the DfE for 18 months.
Badenoch was born in Wimbledon, London, and grew up in Nigeria and the US, before returning to the UK aged 16.
Badenoch became an MP in 2017, and prior to that she was a London Assembly member, crossing over with Johnson's tenure as mayor of London.
There she was spokesperson for the economy, deputy chair of the health committee, and sat on transport and policing committees.
Badenoch is a strong Brexit supporter and initially supported Michael Gove in his recent bid for the Tory leadership.
I'm humbled to have been appointed a junior minister at the DfE. A huge privilege to be able to serve and make a positive difference on a number of issues close to my heart. I look forward to working with the ministerial team and everyone at @educationgovuk ...(1/3)— Kemi Badenoch MP (@KemiBadenoch) July 29, 2019
Zahawi, who according to early years leaders, leaves Badenoch "overseeing a sector in crisis", said his successor would make a "passionate and real champion" for vulnerable children and families.
Badenoch studied systems engineering at Sussex University, later also gaining a law degree, and has worked in the IT and banking sectors, including for RBS and Coutts.
Neil Leitch, chief executive of the Early Years Alliance, said: "It's hugely disappointing to have lost the fifth minister for childcare in almost as many years.
"Kemi Badenoch inherits a brief overseeing a sector in crisis: there is now a £662m funding shortfall and thousands of providers have closed with many more continuing to struggle on. The challenges facing the sector are significant but are not insurmountable and they require urgent action.
"Families value the high-quality, dedicated workforce and we look forward to working with the new minister to ensure children across the country have the best start in life."
It was an honour to serve as Children's Minister and I want to thank my brilliant team at @educationgovuk, Rachel, George, Jenny, Jacob and Zahra. I wish my successor all the very best, he or she could not have a better team to support them!— Nadhim Zahawi (@nadhimzahawi) July 26, 2019