Apart from appointing a new chairman, Tesla was required to appoint two new independent members to its board.
In late September, Musk, who remains chief executive and is also Tesla's biggest investor, agreed to step down as chair for three years and pay a fine in a deal with the US Securities and Exchange Commission over tweets he made about taking the firm into private ownership.
She will also be leaving her role as CFO and Head of Strategy at Telstra, Australia's largest telecommunications company, after a six-month notice period there, to focus on her work as Tesla chair full-time, the company said in a statement.
USA authorities sued the entrepreneur for misleading investors and he and Tesla were each fined $20m.
New Zealand bat in first Pakistan ODI In response Pakistan crumbled to 85-6, before Sarfraz Ahmed (64) and Imad Wasim (50) added 103 for the seventh wicket. Not since Darrel Hair no-balled Murali at the MCG has cricket witnessed a "chucking" controversy quite like this.
Weeks later, Mr Musk backed away from the plan, citing investor feedback. In media interviews he said he often slept on a sofa in the Tesla office and more recently in an online video he briefly smoked marijuana.
Tesla said Denholm will be serving as chair on a full-time basis.
The carmaker last month quieted some critics after it reported a net profit, positive cash flow and wider-than-expected margins in the third quarter, delivering on Musk's promise to turn the company profitable.
"I believe in this company, I believe in its mission and I look forward to helping Elon and the Tesla team achieve sustainable profitability and drive long-term shareholder value", Denholm said according to a statement issued by the auto maker.
Ms Denholm has served on the Tesla board as an independent director since 2014 and has also worked in Silicon Valley and for companies including Toyota.