Pavlich will officially take over at the end of this season, when Harley departs to take the role of AFL chief operating officer.
An Australian Football Hall of Fame member, Pavlich played 353 games and kicked 700 goals for the Dockers over a career spanning 17 seasons.
The 43-year-old, who retired in 2016 as a six-time All-Australian, has since embarked on business and media careers, including television roles as a commentator and news reader.
He said a decade in business had been crucial in preparing him for the Swans role.
"I feel comfortable enough as I can be," Pavlich said.
"There'll be plenty of unknowns about this role. There'll be plenty of things that I'll have to listen and learn from.
"And I said to the staff earlier, the IP, the expertise and the knowledge that is in that room, I'm just going to have to absorb."
Pavlich had previously been linked to the role of AFL Players Association chief executive, vacated by Paul Marsh in May, having served as the organisation's president during his playing days.
Pavlich was also previously part of the AFL laws committee and more recently played a role in external reviews conducted at Adelaide and Carlton.
Swans chairman Andrew Pridham was "delighted" to appoint Pavlich as chief executive, lauding his wealth of football experience as a player and administrator.
Pridham said the Swans were eager to appoint someone from outside the club who had a similar background to former Geelong champion and premiership star Harley.
"Matthew's football pedigree, in addition to his business experience and importantly his knowledge of the industry ... we've got great confidence that he displays every element of what we're looking for," Pridham said.
"Football's a funny industry. It throws curveballs at you at all times, so I'm sure he's adept at dealing with those, and we're really looking forward to his leadership."
Pavlich will relocate to Sydney from Perth with his wife and their three children, and hopes to steer his new club back up the ladder.
The Swans have missed the finals this season on the back of a grand final appearance last year.
"The culture's strong, there's great stability and strength off the field, and we're hoping to quickly get back that on-field success as well," Pavlich said.
The former Fremantle captain will work closely with Sydney coach Dean Cox, who was on the opposite side of Perth's cross-town rivalry throughout his own 290-game playing career with West Coast.
Cox took the coaching reins from 2012 premiership mentor John Longmire this season and has a 10-10 record at the helm.
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