He joins cricket icon Sachin Tendulkar, ace shooter Abhinav Bindra and Bollywood star Salman Khan, who all had earlier accepted the role offered by the Indian Olympic Association.
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On Thursday, the IOA said it received written confirmation from Rahman.
"It's absolutely an honour and my pleasure to be a goodwill ambassador of the Indian contingent scheduled for August 2016," Rahman said, in a statement issued by the IOA.
Welcoming Rahman on board, IOA secretary-general Rajeev Mehta said, "I would like to welcome A R Rahman on board as a goodwill ambassador of (the) Indian contingent for Rio Olympics. It's our privilege to have the Oscar-winning living legend-music composer on board to spread awareness and promote the Olympic movement.
"As per our plan to reach out to maximum people in the country for Olympic Sports, we are happy that Mr Rahman has come forward from the field of music to support our athletes and we already have Salman Khan from Bollywood, Abhinav Bindra from Olympic Sports and Sachin Tendulkar from Cricket. I am sure Mr Rahman will inspire our sportspersons."
There was a huge uproar after Salman was appointed Goodwill Ambassador ahead of other sporting luminaries.
Former and current athletes were up in arms against Salman's appointment and demanded to know why someone from the field of sports was not named by the federation.
The IOA immediately went into damage-control mode and requested Beijing Games gold medallist shooter Bindra and Tendulkar to be Goodwill Ambassadors.
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