The existing Office of National Assessments will subsumed by the new super department and the Australian Signals Directorate will become a stand alone agency.
Mr Warner attracted controversy in August when he posed with Philippines president Rodrigo Duterte - with the pair photographed making Mr Duterte's trademark fist-pump hand gesture.
Human rights groups said the pose was tacit endorsement of the hardline leader's more than 12,000 extra judicial killings and poor human rights record.
Mr Warner previously served as Defence secretary and was senior international adviser to former prime minister John Howard.
The Office of National Intelligence will be established in 2018,tasked with coordinating strategy and capability development across Australia's intelligence agencies.
"I am confident that Mr Warner will ensure that Australia's intelligence agencies remain the most capable,agile and effective in the world,"Mr Turnbull said in a statement.