Pandya, who helped Mumbai to four IPL titles between 2015-2021, led the Gujarat Titans to the title in their debut season in 2022 and was also captain of the squad that finished runners-up to Chennai Super Kings this year.
But he expressed his desire to return to his original team, which put an additional 150 million rupees ($1,806,546) in Gujarat's coffers ahead of the IPL auction on Tuesday.
"It is part of legacy building and staying true to the MI philosophy of being future-ready," Mumbai's global head of performance Mahela Jayawardene said in a statement.
"Mumbai Indians have always been blessed with exceptional leadership right from Sachin (Tendulkar) to Harbhajan (Singh) and Ricky (Ponting) to Rohit, who while contributing to the immediate success have always had an eye on strengthening the team for the future.
"It is in keeping with this philosophy that Hardik Pandya will assume captaincy of Mumbai Indians for the IPL 2024 season."
Pandya's rise to Mumbai captain brings an end to Rohit's era where the franchise won the IPL title five times between 2013 to 2020. Rohit is also the Indian team captain.
"Under his guidance, MI became one of the most successful and loved teams ever. We will look forward to his guidance and experience on and off the field to further strengthen MI," the team said.
