Gandhi, a 42-year-old lawmaker, was appointed the party vice president, a position behind his mother Sonia Gandhi, who is the Congress party president, spokesman Janardhan Dwivedy told reporters.
The elevation positions him to lead the party, which his family has long dominated, in parliamentary elections next year. He is expected to be the party's candidate for the post of prime minister in elections due early 2014.
"This decision will greatly strengthen the party," Dwivedi said in a statement after a meeting of the party's top policy making body in the western Indian city of Jaipur.
Rahul Gandhi in his acceptance speech said he had acquired "great experience" over the past eight years while working for the party organization, the Press Trust of India news agency reported.
"I have seen it is a great organization and together we will transform the country," PTI quoted him as telling his cheering supporters at the party meeting.
Manmohan Singh, a technocrat, was chosen to fill the prime minister's seat in 2004 by Sonia Gandhi.
Singh was widely seen as a regent, keeping the seat warm until Rahul Gandhi—the son, grandson and great-grandson of Indian prime ministers—was ready to take what some see as his birthright.
But Gandhi displayed little public sign that he is undergoing any sort of apprenticeship that would prepare him for running the country. He has never held a Cabinet-level position.
Party workers have been demanding Rahul Gandhi's elevation for years, but he had been shying away from holding a top position in the party.
His supporters argued he was rebuilding the party at the grassroots level and has taken a lead in the Congress' campaigns in state elections in Uttar Pradesh and in Bihar in recent years. The party performed poorly in both states' elections last year.
Rahul Gandhi entered politics in 2004 and became a lawmaker from Amethi seat in northern Uttar Pradesh state. The parliamentary seat was held by his mother until she shifted to a neighboring constituency.