Grossi had been serving as Argentina's ambassador to the International Atomic Energy Agency and is the agency's first leader from Latin America, AFP reported.
Grossi previously held high-level posts at the agency between 2010 and 2013, bringing him into contact with Iranian officials at a time when international negotiations over Iran's nuclear activities were intensifying, Financial Tribune reported.
According to the former French ambassador to Iran, Francois Nicoullaud, Grossi will able to draw on "solid experience in proliferation matters".
"He is someone of a very high caliber who comes from an important country in the nuclear field," Nicoullaud said.
A current Vienna-based diplomat said Grossi was expected to bring "a lot of energy and innovation" to the post, with a particular focus on pushing gender parity within the agency and promoting the role of nuclear energy in fighting climate change.
Grossi will be taking over from Yukiya Amano, who died in July at the age of 72 holding the post since 2009.
While the US is thought to have lobbied in his favor, diplomats say Grossi has stressed his belief in upholding the agency's impartiality.
Iran’s Nuclear Dispute
Grossi begins his tenure amid growing tensions over Iran's nuclear activities.
IAEA is charged with monitoring the implementation of the 2015 Iran nuclear deal, which seems to be in danger of imminent collapse.
Without mentioning Iran by name, in his first speech to IAEA member states on Monday, Grossi praised the agency's "impartial, accurate system of inspections".
"No one else can do what we can do; no one else can provide this credible assurance that nobody is diverting nuclear material to make nuclear weapons," he said.
Diplomats from Iran and the other remaining parties to the deal—the UK, France, Germany, China and Russia—will gather in Vienna on Friday to discuss ways of saving the crumbling deal.
Since May, Iran has taken a series of measures breaking limits on its nuclear activities laid down in the deal, with another one likely in early January.
Iran says it has the right to do this in retaliation for the US withdrawal from the deal in 2018 and reimposition of harsh sanctions.
Ali Vaez from the International Crisis Group says the deal could collapse in a matter of weeks.
"The Iranians are simply running out of measures that are easy to reverse and non-controversial," he said.
Vaez noted that a fresh Iranian move to surpass the deal’s limits could finally push the European signatories to trigger the "dispute resolution mechanism" foreseen in the 2015 accord, which in turn could lead to the automatic resumption of UN sanctions on Iran.
‘Death Blow’
The return of those sanctions would mark the "death blow" of the agreement, according to Kelsey Davenport of the Arms Control Association.
In such a scenario, Vaez says, "We will have a major non-proliferation crisis on our hands in the sense that the Russians and the Chinese have already declared they would not recognize the return of [sanctions]."
Some expect that in this scenario, Iran could leave the Treaty on the Non-Proliferation of Nuclear Weapons.
There have been other points of friction between Iran and IAEA in recent months.
The agency has been asking Iran to provide explanations for the alleged presence of uranium particles at an undeclared site it reportedly took samples from in the spring.
Added to this is an incident in October in which an IAEA inspector was briefly detained after she triggered a security alarm by carrying “suspicious materials”.
She was allowed to return to Vienna, but the IAEA has criticized her treatment as "not acceptable".