An early morning meeting of party MLAs in Chennai elected her unanimously, party sources said.
Party Treasurer and Chief Minister O Panneeerselvam forwarded the motion to elect her as legislature party leader which was seconded by Electricity Minister Natham R Vishwanathan, the sources said, adding, it was adopted unanimously.
A beaming Cooperative Minister, Sellur K Raju, when asked if Jayalalithaa had been elected as LPP leader, said: "this is the happiest day of our life."
The 67-year-old leader was disqualified following her conviction in the Rs 66.66 crore disproportionate assets case by a trial court in Bengaluru on September 27.
The Karnataka high court had subsequently acquitted her of the charges on May 11.
Jayalalithaa is later expected to stake claim for forming the government, with the resignation of incumbent Panneerselvam being a mere formality.
In the resolution moved by him, Panneerselvam praised the leader, describing her as the "permanent general secretary" of the AIADMK.
He asked the MLAs present there to show their sign of approval by giving a "loud applause".
The meeting was also attended by some rebel MLAs of the Opposition DMDK.
Later, Panneerselvam, accompanied by some of his senior cabinet colleagues, visited the Poes Garden residence of Jayalalithaa.
The AIADMK supremo is later scheduled to garland the statues of Tamil Nadu leaders -- party founder and her mentor MG Ramachandran and Dravidian veterans E V Ramasamy popularly known as Periyar and C N Annadurai, thus making her first public appearance since her acquittal on May 11.