Dr Suelette Dreyfus is an expert on whistleblowing and technology, data retention, privacy and national security.
The new graduate school will help nurture future political leaders and public servants, and cement the University as a regional leader in the study of public policy.
University Vice-Chancellor Professor Glyn Davis said it will provide a platform for informed and independent debate on key public policy challenges.
"The Melbourne School of Government will seek to unite policy makers, industry leaders and members of the public to help provide workable policy solutions," Professor Davis said.
"It will draw together existing expertise and students from across the University in the fields of political science, international relations, economics, law, development studies and more."
"Critical and innovative thinking about governance is crucial and timely as existing institutions in democratic and non democratic states face challenges of legitimacy and accountability."
The Melbourne School of Government will sit within the Faculty of Arts and absorb the existing Centre for Public Policy.
Public Policy Professor Helen Sullivan will act as the new School's inaugural Director.
"The research and teaching capability of the new School will strengthen our relationships with leading public policy schools internationally as well as in our region,” she said.
"It will also help us form new partnerships with governments at all levels, public agencies, charities, industry groups and non governmental organisations. The new School will offer tailored public policy advice as well as new executive education programs."
The School’s first major research project will be in conjunction with the Institute of Public Administration Australia (IPAA) and look into the changing role of public services.
Students currently engaged in the Master of International Relations, Master of Development Studies and Master of Public Policy and Management programs will become part of the new School from 2013.
New streams of study will be added in 2014.
Arts Faculty Dean Professor Mark Considine said the School of Government will tackle the "big questions" facing society.
"This will mean a focus on government capacity and responsiveness to citizens. In essence, how might we design better public institutions?" he said.