The Gol Maal star, 70, whose film Paheli was India's official entry for the Academy Awards in 2005, will be heading the 17-member jury.
"We have selected Amol Palekar as the head of India's Oscar jury. He is an eminent film personality," Supran Sen, Secretary General of the Mumbai-based Film Federation of India (FFI) said.
An elated Palekar said the process of selecting the film to represent India at Oscars 2016 is yet to begin.
"I am happy that I have been appointed as the chairman of India's Oscar jury. We haven't decided on any criteria for selecting a film for Oscars. I will have a meeting first with our esteemed members and work out the selection criteria," he said.
The Mumbai-based actor, who has been away from the silver screen for quite some time, is known for portraying the middle-class Indian in a string of films such as Rajnigandha, Chhoti Si Baat, Chitchor, Gol Maal and Gharaunda in the 1970s.
He also directed National Award-winning films like Dhyaas Parva and Quest.
Last year, Liar's Dice, a road drama starring Geetanjali Thapa and Nawazuddin Siddiqui in lead roles, was selected as India's official entry to the best foreign film category after beating Shahid, Queen, Mardaani, Marathi films Yellow and Fandry and Bengali films Jatishwar and Apur Panchali.
Mother India, Salaam Bombay and Lagaan are the only Indian films that made it to the top five at the Academy Awards.
The 88th Academy awards event will take place in Los Angeles on February 28, 2016.
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