Abbas, who has been the PLO's second-in-command, was unanimously elected just hours after Arafat's death by the PLO executive committee in a widely anticipated move.
The PLO is the political arm of the Palestinian people. It remained uncertain whether a popular election would be held for president of the Palestinian Authority, the governing body. Arafat was both president of the Palestinian Authority and chairman of the PLO, the latter the more powerful post.
Because Abbas is now chairman of the PLO, "no one will compete with him" if there is a presidential election, Palestinian Cabinet minister Ibrahim Abu Najah told the Associated Press.
Abbas, a pragmatist with a fierce devotion to the Palestinian cause but little stomach for politics, dared to reach out to Israel years before most other Palestinians were ready to do so. He alienated many constituents during a short stint as prime minister last year by urging an end to nearly three years of armed uprising.
Abbas, 69, resigned after four months as Palestinian Authority prime minister, but emerged in recent weeks as the seriousness of Arafat's illness became clear. He has assumed some of Arafat's powers, sharing them with his successor as the Palestinian Authority prime minister, Ahmed Korei, another longtime Arafat associate.
Under Palestinian law, Arafat's role as president of the Palestinian Authority falls to the speaker of the Palestinian parliament for up to 60 days, until elections can be held.
But in taking over as PLO chairman, and in effect head of its dominant Fatah faction, Abbas would wield considerable clout in domestic politics and diplomacy, perhaps more than the Palestinian Authority president.
It remains to be seen whether elections will be held to replace Arafat as Palestinian Authority president — and, if so, whether Abbas would run as a way to consolidate Arafat's former powers. He is considered strong inside the PLO, and has credibility among Islamic militant groups, such as Hamas.
But to win broader political legitimacy, Abbas would have to improve his standing among ordinary Palestinians, who don't know him well.
Abbas, a devout Muslim also known as Abu Mazen, is determined in his political beliefs, though he can be thin-skinned, associates say. This shows, they say, in a tendency to walk away from long-shot fights — as when Abbas resigned as prime minister in September 2003 over differences with Arafat.
"He hates politics. He was never a [government] minister and never elected to the Palestinian parliament. He doesn't like the work of politicians," said Yossi Beilin, a former Israeli Cabinet member who negotiated the 1993 Oslo accords with a Palestinian team led by Abbas.
Beilin and others say that Abbas is a realist, but is as committed a nationalist as Arafat, and therefore unlikely to give ground easily on issues such as the fate of Palestinian refugees and claims to Jerusalem.
"There is not going to be a major shift from current Palestinian policies right away," said Ali Jarbawi, a political scientist at Birzeit University in Ramallah. "If [the United States and Israel] expect this, then they're going to ruin any possibility."
Born in 1935 in the northern Galilee town of Safed, Abbas was a refugee, returning to the Palestinian territories in 1995 after a nearly 50 years in exile. During that time, he studied law in Syria and history in Moscow.
But most of his life has been consumed by the Palestinian cause, beginning in the 1960s as one of the founders of Fatah.
Over the years, Abbas has shown a willingness to reach his own conclusions and to take unfashionable positions.
He made contacts with Israeli peace groups during the 1970s and was among the first Palestinians to urge negotiations with Israel that would produce side-by-side states.
As prime minister, Abbas gave a boost to the U.S.-backed "road map" to peace, declaring that "the armed intifada must end." Abbas argued that the conflict was causing irreparable harm to Palestinian society.
Also as prime minister, he squabbled with Arafat by seeking more authority over the security forces. Israeli Prime Minister Ariel Sharon undercut him as well, denying Abbas any important political achievements, such as a release of Palestinian prisoners.
Abbas left in frustration, despite making improvements in government accountability.