The council will help the Pope revise the Apostolic Constitution on the Roman Curia Pastor bonus -- the Church administration which helps him in the daily governance, the Vatican said in a statement.
Pope John Paul II had issued Pastor Bonus in 1988.
"The Holy Father decided to set up the Council following on from discussions that emerged during the General Congregations in the lead up to the Conclave which elected him the 265th Successor to St Peter," it said.
68-year-old Gracias currently serves as Archbishop of Bombay (Mumbai), having been appointed by Pope Benedict XVI in 2006. He was raised to the cardinalate in 2007.
Besides Gracias, the group is composed of Giuseppe Bertello, President of the Governatorate of Vatican City State; Francisco Javier Errazuriz Ossa, Archbishop emeritus of Santiago del Cile (Chile); Reinhard Marx, Archbishop of Munchen und Freising (Germany); Laurent Monswengo Pasinya, Archbishop of Kinshasa (Congo); Sean Patrick O'Malley, Archbishop of Boston (US); George Pell, Archbishop of Sydney;
Oscar Andres Maradiaga Rodriguez, Archbishop of BostonTegucigalpa (Honduras).
The group of Cardinals will be coordinated by Rodriguez while Marcello Semeraro, Bishop of Albano (Italy), will serve as the secretary.
The first meeting of the Council will take place on October 1-3, 2013, the statement said.
Vatican spokesman Federico Lombardi said the appointments comes exactly one month after Pope Francis was elected as the leader of the world's 1.2 billion Catholics.
The council would have no legislative power and that its main function is to "help" and "advise" the Pope, the Vatican Radio quoted Lombardi as saying.
The Pope has already been in touch with the selected cardinals, he said.
The Catholic Church has faced calls for reform in the wake of scandals involving the sexual abuse of children by priests and allegations of corruption.
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