The popular McGrath, who has played 180 games since debuting in 2017, was officially unveiled as Essendon skipper on the same day highly respected chief executive Craig Vozzo quit.
Defender McGrath received "overwhelming approval" from the Essendon playing group to become the club's 42nd captain.
"This is a well-deserved achievement and a fitting honour for someone who's frequently set the example of exactly what an Essendon person should be," Essendon football boss Daniel McPherson said on Wednesday.
"We're thrilled for Andy and we know he'll handle the responsibility with the level of character and dedication we've grown accustomed to seeing from him."
It ends a difficult year for the Bombers, who finished 15th and had to deal with superstar Merrett wanting to leave for Hawthorn.
Essendon refused to accept any offers for the Hawks to trade Merrett and he will remain at the club in 2026.
But it became untenable for him to remain captain, with Merrett eventually giving up the role voluntarily before he was forced to.
Kyle Langford, Mason Redman, the injured Nic Martin, Sam Durham, Jye Caldwell and Gold Coast recruit Brayden Fiorini have been named in the leadership group alongside McGrath.
Meanwhile, Vozzo, a former West Coast football boss, has decided to step down as CEO, three years after being appointed to the role following the disastrous and short tenure of Andrew Thorburn.
Just eight days before Christmas, Vozzo informed the club he wanted to relocate to South Australia, declaring it had been a "great honour and privilege'' to lead Essendon.
"I've been living away from my home and my wider family and friends back in South Australia for 15-plus years now," Vozzo said.
"My initial three-year contract was coming to an end, which gave me the opportunity to reflect on my future.
"Following the conclusion of our AFLW season and men's draft, I returned to South Australia for a few weeks to be around family and my closest friends, to have some quiet time to deeply reflect.
"In that time, it really reinforced to me that it is the right time in my life to take a step back from the CEO role and further prioritise my family ahead of my career.
"This has been one of the most difficult decisions I've ever had to make, because I love this football club and everything it stands for to so many."
Chief operating officer Nick Ryan will be acting CEO until a permanent replacement is appointed.
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