Ali served as the foreign secretary during the ruling Awami League's previous 1996-2001 tenure.
He will succeed Tariq A Karim who is Bangladesh's envoy in India for the past five years, said a Foreign Ministry statement.
A former member of the then Pakistani foreign service, Ali joined the service in 1968 while he severed his links with Islamabad during 1971 Liberation War expressing his allegiance to Bangladesh government in exile in India while he was posted in the United States.
Ali earlier served as Bangladesh's ambassador to Bhutan, Iran and France and served in other capacities in several other countries.
He retired as the top bureaucrat in the foreign ministry in 2001.