Lawson, 22, has been Red Bull reserve since 2022 and filled in for 35-year-old Ricciardo at five races last year when the eight-time grand prix winner was injured.
The move was widely expected following mounting speculation that the Australian's Formula One career had reached the end of the road.
Ricciardo made a mid-season comeback with the team last year hoping to show he still had what it takes, with the prospect of possibly replacing Sergio Perez at the main Red Bull team, but has instead been outperformed at RB by Japan's Yuki Tsunoda.
"Daniel has been a true gentleman both on and off the track and never without that smile. He will be missed, but will always hold a special place within the Red Bull family," team boss Laurent Mekies said in a statement.
"I’d also like to take this opportunity to welcome Liam. He already knows the team well. He drove for us last season, and coped well under difficult circumstances, so it’ll be a natural transition."
Italy-based RB had initially posted a 'thank you' message on social media.
"I’ve loved this sport my whole life. It’s wild and wonderful and been a journey," Ricciardo said separately on Instagram.
"To the teams and individuals that have played their part, thank you. To the fans who love the sport sometimes more than me haha thank you. It’ll always have its highs and lows but it’s been fun and truth be told I wouldn’t change it.
"Until the next adventure."
Ricciardo's departure was taken as written at last weekend's Singapore Grand Prix, with the Australian finishing last but pitting for a third time at the end of the race to put on fresh tyres and set the fastest lap.
Mekies explained afterwards that the team had given him the chance "given this may have been Daniel's last race".
Ricciardo, an ever-smiling fan favourite whose departure will be mourned by many, took seven of his victories with Red Bull and the final one during an ill-fated stint with McLaren in 2021.
He finished third in the championship in 2014 and 2016, the latter time as team mate to now-triple world champion Max Verstappen. Singapore was his 258th race in a career with 32 podiums and 1329 points.
Lawson has been biding his time since his stand-in performance, with Red Bull clear that he would be in Formula One eventually.
Born in Hastings but raised in Pukekohe, Lawson began karting when he was 7-years-old. He started competing in numerous championships across New Zealand and won two karting titles in 2014.
In 2015, Lawson entered the NZ F1600 Championship Series and became the youngest ever champion in the series' history. In 2017, he moved up to the Australian F4 championship with BRM, finishing second in his rookie season. On his way to Formula One , Laswon also competed in the Toyota Racing Series, Euroformula Open Championship, and FIA Formula 3 Championship.
RB also announced Tsunoda will stay in 2025 but the second seat remains unconfirmed, although Lawson is the clear favourite to fill it.
"I'm extremely grateful to be given the opportunity to drive for VCARB (RB), it's been my dream to drive in Formula One since I was a kid. I'll be doing everything I can to be ready for Austin," he said.
The next race is a sprint weekend in Texas on October 20, the first of a triple header that includes Mexico and Brazil.
The season ends with another triple header in Las Vegas, Qatar and Abu Dhabi.
