The network said "World News Tonight" also would become the first network evening newscast to be broadcast live each night in three time zones, including for the West Coast.
Vargas and Woodruff have been two of the chief substitute anchors on "World News Tonight" since Jennings announced in April that he had lung cancer. Jennings died on Aug. 7.
Charles Gibson, who also substituted for Jennings and was considered a top candidate for the job, will remain as host of ABC's "Good Morning America."
The decision will make Woodruff and Vargas the first co-anchors of an evening newscast since Dan Rather and Connie Chung briefly worked together at "CBS Evening News" in the 1990s.
ABC's "World News Tonight" is ranked second in the Nielsen Media Research rankings, and has been fading a bit lately to NBC's first-place "Nightly News," anchored by Brian Williams. CBS is still searching for its replacement for Rather, who left in March, amid reports that it is seeking NBC's Katie Couric for the job.
"Elizabeth and Bob together will be the anchors for this new broadcast and digital age of `World News Tonight,"' ABC News President David Westin said. "Their experience as journalists, their familiarity to our audiences, and their commitment to gathering and delivering the news anywhere, anytime and in every way make them the right team to take us forward for the new generation."
The three separate newscasts will begin on Jan. 2, as will a daily Webcast with the day's top stories.
Vargas, 43, has been co-anchor of ABC's "20/20," and she'll keep that job. Woodruff, 44, was one of ABC's chief correspondents for Hurricane Katrina and the Asian tsunami, and has been anchor of the weekend "World News Tonight" newscasts.