The selection was made public by Scottish Secretary Michael Moore MP in his speech to party conference in Glasgow.
Accepting the nomination, Susan Leslie, who was elected as a councillor in 2007, praised former MSP Jim Tolson and Scottish LibDem leader Willie Rennie, who held the Westminster seat for four years.
She said: "Willie Rennie and Jim Tolson got things done for local people and stood up for the area. That's what Dunfermline and west Fife will get if they elect me as the new MSP for the area.
"We need action on the Victoria and Queen Margaret Hospitals, action to create more jobs, improved childcare and a reversal of the cuts to the college. The SNP have let the area down. It's time to return to the kind of action and service provided by Jim and Willie."
Mr Rennie said Ms Leslie's record and commitment to Fife has been impressive, adding: "We're going to work hard for every vote and remind people how powerful a force LibDems are for their community."
The bookmakers have Labour as favourites over the SNP with the LibDems some way back. Labour has selected local Councillor Cara Hilton to contest the seat, while the SNP are going with Fife-born Shirley-Anne Somerville, an ex-MSP who works for Yes Scotland.