Five members of the council of eight voted for Kraft, council chairman Mart Sorg said.
The ex-governor's candidacy was proposed by councillor Juri Sepp. Kraft's rival for the governorship was another council member, Kalev Kukk, who nominated himself.
Kukk withdrew from the race in the course of discussion of other possible candidates, Sorg said.
Vahur Kraft, 39, was born in Tartu and went to Secondary School No 1. He graduated from Tartu University in 1984, specializing in crediting and finance.
In 1984-90 Kraft headed a division of the USSR State Bank's Estonian Republic Bank and then for one year served as board chairman of Eesti Sotsiaalpank.
In 1991-95 Kraft was vice-president of the Bank of Estonia. In 1992-95 he was vice-governor and later governor of IMF in Estonia.
When Siim Kallas resigned as Bank of Estonia president in 1995, Kraft became his successor. His term expired in mid-April this year.
Kraft ran in the previous round of governor elections early in April, but came second after Vello Vensel, who gave up his post shortly before having to take office.
Kraft took part in carrying out the currency and banking reform in Estonia. In addition to Estonian he can also speak English and Russian.