"Succession planning has been high on the Board's agenda and with the business performing strongly, we believe the time is right to make the transition at CEO level," said chair Graham Smith.
"We believe Steve Vamos brings an invaluable skill set to lead Xero. He has worked in some of the world's largest tech companies and is a recognised, purpose-driven people leader, with a focus on growth and operational excellence."
Drury said: "It's now the right time for me to pass the baton to Steve, who has the experience to significantly expand Xero internationally.
"Steve has demonstrated to the board and me that he has the skills and experience we need to execute Xero's next phase of growth, while I contribute to strategy as a non-executive director with my passion for product innovation."
Vamos has been working closely with the Xero executive team for 18 months, and will take up his new role on 1 April.
He currently serves as a non-executive director of Telstra and of Fletcher Building, and is a member of UTS Business School's advisory board. Until recently, he was chairman of Divvy Parking, and has also held non-executive directorships at David Jones and Medibank.
After spending 14 years at IBM Australia in various professional and executive roles, he became managing director of Apple ANZ.
Vamos subsequently became chief executive of NineMSN (the joint venture between Microsoft and PBL). From there he was appointed Microsoft's ANZ vice-president and later moved to the US to become international vice-president of the company's online services group.
He has an honours degree in civil engineering from the University of New South Wales.
Smith praised Drury's ongoing contribution to Xero: "Rod's achievement of building a global company and community from New Zealand is unmatched and on behalf of the board I'd like to thank him for his tremendous leadership since founding the company. With a strong leadership team in place, Steve's appointment underpins the important evolution from a founder-led company to a business with worldwide scale. At the same time, Xero will continue to benefit from Rod's product vision as a non-executive director."
Looking back on the company's history, Drury said "It's been a huge 11 plus years building Xero. It's amazing to consider we started with just four people in a small Wellington apartment and we now have over 2,000 people across 17 offices in eight countries, and over 1.2 million subscribers. I'm so proud of the Xero team, the community that's formed around us, the positive impact we've had on our customers, and the shareholder value we've created."
Vamos said "What Rod and Xero have accomplished is rare and remarkable. I'm excited to have this opportunity to lead Xero's growth and development going forward. I have really enjoyed the opportunity to work with the Xero leadership team and we have a clearly communicated strategy, which we are committed to executing.
"Xero is a special company with an extremely important purpose and significant opportunities. I look forward to continuing to work with Rod, the Board, the entire Xero team, and our partners and customers, to deliver on the potential of Xero's global platform."