The militia, which changed its name on Saturday from the Islamic Courts Union to the Conservative Council of Islamic Courts, said in a statement it had appointed Sheikh Hassan Dahir Aweys as its new leader.
The Bush administration has said Aweys was an associate of Osama bin Laden in the early 1990s.
The Islamic militia seized control of the capital Mogadishu and much of southern Somalia from an alliance of warlords earlier this month.
Aweys’ appointment makes it unlikely that the increasingly powerful militia will govern using the moderate brand of Islam practiced by most Somalis.
The appointment is also likely to stoke Washington’s long- standing fears that the chaotic Horn of Africa nation will become a safe haven for bin Laden’s terror network much like Afghanistan did in the 1990s.
US officials have accused the Islamists in Somalia of harboring al- Qaeda leaders responsible for the deadly 1998 bombings of US embassies in Kenya and Tanzania.
Aweys appeared on a list of individuals and organisations accused of having ties to terrorism which the United States released after the September 11 attacks.
A conservative Somali group called al-Itihaad al-Islaami and its founder, Aweys, were featured for their alleged links to bin Laden while the al-Qaeda leader was living in Sudan in the early 1990s.
The government has taken control only of a small portion of the nation of 7 million.
Anger at foreigners runs high Mogadishu, which is awash in weapons after so many years of anarchy.
Anti-foreigner sentiment has been stoked by reports that the warlords defeated by the Islamic leaders this month had been secretly financed by the CIA.
On Friday, 47-year-old Swedish journalist Martin Adler was shot in the back and killed while covering a rally in Mogadishu to celebrate the deal with the interim government.
The assailant has not been caught, but the militia said the killing was planned by a foreign enemy that wants to shatter weeks of relative peace since the Islamic militia took over.
The death was a blow to the militia’s pledge to pacify Mogadishu.