The World Bank on Monday picked Dartmouth College President Jim Yong Kim as its new director despite pressure to break the long-stranding precedent of awarding the job to an American.
President Obama nominated Kim to the post last month.
The United States is the largest member of World Bank, and longstanding tradition has reserved the top spot for the country's nominee.
Developing nations have begun pushing for more say in the leadership of the organization. Also nominated to lead the bank was Nigeria's finance minister, Ngozi Okonjo-Iweala. Colombian economist Jose Antonio Ocampo was also in the running to become director, but dropped out just days before Kim was named and threw his support to Okonjo-Iweala.
"It is clear that this is not based on the merits of the candidates but is a political exercise," Ocampo said, according to multiple media reports.
Obama hailed the World Bank's move, calling Kim "an inclusive leader who will bring to the Bank a passion for and deep knowledge of development."
He also offered kind words to Kim's competitors, and praised the selection process.
"I am also pleased that this has been an open and transparent process, and would like to take this opportunity to acknowledge the outstanding qualifications and commitment of the other two candidates," he said in a statement.
The push from developing nations to upset historic convention is a replay of a similar power struggle at the top of another global group, the International Monetary Fund (IMF).
Traditionally, a European has headed that group, buoyed by backing from the U.S. But after former head Dominique Strauss-Kahn resigned, Mexican central banker Agustin Carstens was pushed as a competing nominee. Europe ultimately retained control, however, as French finance minister Christine Lagarde has taken the mantle as IMF director.
Kim's ascension could give new perspective to the international financial institution because he has spent much of his career focusing on health issues rather than strictly economic matters.
When Obama nominated Kim in March, he focused on Kim's work to fight HIV/AIDS across the world, adding it was "a cornerstone" of his own development efforts.
"I'm pleased that Jim brings this particular experience with him to his new job," he said.
After winning the job, Kim said he was grateful for the "broad support" he received from the bank's board, while offering kind words to his fellow nominees.
"They have both made important contributions to economic development, and I look forward to drawing on their expertise in the years to come," he said.
Kim promised to lend an open ear to developing nations as he steers the organization as he seeks "a new alignment ... with a rapidly changing world."
"Together, with partners old and new, we will foster an institution that responds effectively to the needs of its diverse clients and donors; delivers more powerful results to support sustained growth; prioritizes evidence-based solutions over ideology; amplifies the voices of developing countries; and draws on the expertise and experience of the people we serve," he said.
Treasury Secretary Timothy Geithner hailed the World Ban’s decision, saying Kim would "breathe new life" into its efforts.
"I am confident that the World Bank will benefit from Dr. Kim’s fresh perspective and strong leadership, and I look forward to working with him as he steers this indispensable institution into the future," he said in a statement.
Before becoming the president of Dartmouth in 2009, the physician and anthropologist spent much of his professional career working to improve health conditions across the developing world.
He co-founded the global health advocacy organization Partners in Health and headed the Department of HIV/AIDS at the World Health Organization. He also was a professor at Harvard Medical School and the Harvard School of Public Health.
Kim will take the reins at the World Bank in July, after Zoellick finishes his five-year term heading the organization.
The bank's board hailed all the "high caliber" nominees put forward for the spot, saying, "Their candidacies enriched the discussion of the role of the president and of the World Bank Group’s future direction."
Zoellick offered kind words for his successor, calling him "an impressive and accomplished individual."
"Jim has seen poverty and vulnerability first-hand, through his impressive work in developing countries. His innovations in health-care have helped to save numerous lives," he said. "His rigorous, science-based drive for results will be invaluable for the World Bank Group as it modernizes to better serve client countries in overcoming poverty.”
This story was last updated at 3:51 p.m.