Mr Yi has been deputy governor of the bank since 2008, but his appointment was largely unexpected.
China elevated a key confidante of President Xi Jinping to one of the top positions in government on Monday as Beijing cracks down on riskier financing and a debt build-up that may pose systemic risks to the world's second-largest economy.
Separately, the National People's Congress on Monday approved Xi's full cabinet lineup for his new term, with new faces taking over several high-profile roles.
Yi and Liu have a close working relationship, policy insiders said, forged as Liu headed the General Office of the ruling Communist Party's Central Leading Group for Financial and Economic Affairs, while Yi was its deputy head.
Yi, 60, received his Ph.D. from the University of IL and taught at Indiana University.
The election of Liu He by parliament to be a vice premier also comes as the United States presses China to cut its trade surplus by $100 billion. He added, "Compared to officials who do not have an overseas background in the PBOC, Yi has better knowledge of worldwide monetary policy".
"Liu and Yi have a shared understanding of the need for financial market reforms and liberalization, coupled with more effective regulation", said Eswar Prasad, a Cornell University professor and former China head for the International Monetary Fund. He vowed to continue prudent monetary policy, drive reforms and maintain financial stability.
FILE PHOTO: A Chinese national flag flutters outside the headquarters of the People's Bank of China, the Chinese central bank, in Beijing, April 3, 2014.
He helped implement major currency reforms in 2005 and 2015, with the latter turning out to be less successful as it led to a wave of capital flight and currency depreciation, prompting authorities to impose capital controls.
Beijing is merging its banking and insurance regulators to better manage its battle against financial risks, giving new powers to policymaking bodies such as the central bank, and creating new ministries as Xi begins his second five-year term as president.
China should keep the financial sector stable, Yi told reporters on Monday morning.
Zhou was appointed head of the PBOC in 2002 by reformist premier Zhu Rongji.
He was also the head of the State Administration of Foreign Exchange (SAFE) from 2009 to 2016.