Herbert's first commission will be to write and perform a poem to mark the end of Dundee's City of Culture 2017 campaign at a public event on September 30.
The Makar will be responsible for generating a new audience for poetry by mixing traditional verse with new technology.
Facebook and Twitter will be put to work, and computer games students at Abertay University will develop digital poetry projects.
Herbert grew up in Dundee and recently compiled an anthology of poems, Whaleback City with Andy Jackson. He has been shortlisted twice for the TS Eliot prize and twice for the Saltire and is currently Professor of Poetry and Creative Writing at Newcastle University.
Anna Day, director of Literary Dundee, said: "Bill was the obvious choice because we wanted someone who straddled the world of digital and traditional, someone who had their heart rooted in the city but with a global outlook who could use the Makar position to spread the word that Dundee is home to a fantastic amount of poetic talent."
Professor Louis Natanson, who leads computer games education at Abertay University, added: "Bill Herbert's appointment as Dundee's Makar with an emphasis on digital is very exciting indeed. It shows not only how forward-thinking Literary Dundee is, but also how all of our city's creative communities work so closely together week-in, week-out.
"That sense of partnership and support is a big part of Dundee's bid to be UK City of Culture 2017.
"I don't know of any projects like this anywhere else in the world - it just shows how inventive Dundee is, and what wonderful things can come from creative people with different backgrounds working together on equal terms."