Murray spent five years in the role but stepped down in March this year to focus more on grass-roots tennis and spend more time with her family.
The Scot - mother to world number one singles star Andy and the top-ranked doubles player Jamie Murray - was also critical of the competition's format, with Britain forced to play a low-key round-robin tournament each February.
She was unable to guide her side up to the top group, with injuries regularly robbing her of the nation's best players.
Keothavong, who played in 40 Fed Cup ties between 2001 and 2013, has now been charged with the task of improving results and she is looking forward to putting in the hard yards to achieve her aims.
"I’m delighted and honoured to accept this position in the sport that I love," said the 33-year-old. "What a privilege it’s been to see all the British success on the court over the last couple of years, especially this last 12 months.
"But success doesn’t just happen, it takes hard work, dedication, commitment and a desire to continually do better.
"I really look forward to working with everyone in British Tennis: the performance and coaching teams at the LTA and of course the players as we aim to raise the bar even higher."
The former British number one has a talented bunch of players at her disposal, with Johanna Konta now a top-10 star, Laura Robson on the comeback trail and Heather Watson capable of beating most players on her day.