Mr Williamson, the former chief whip, has the unusual distinction of having landed a Cabinet post without any junior ministerial experience.
His appointment has sparked speculation that Mr Williamson might have advised the Prime Minister to hand him the job, effectively promoting himself.
Political editors and pundits have reported “despair” among senior Tory MPs overlooked for the post.
An MP “formerly loyal to Mrs May” reportedly told ITV’s Robert Peston: “She had a golden opportunity to do the right thing and appoint the right people to the right jobs.
“She’s just blown it and exposed herself as weaker than any of us thought. She’s being controlled by young men in suits. I now despair.”
Number 10 confirmed Mr Williamson’s promotion with a statement which read: “The Queen has been pleased to approve the appointment of Rt Hon Gavin Williamson as Secretary of State for Defence.”
Julian Smith has been promoted from deputy chief whip to chief whip in Mr Williamson’s place. Esther McVey becomes the new deputy chief whip.
Mr Williamson, 41, replaces Mr Fallon who resigned after it emerged he made unwanted advances on a journalist 15 years ago.
Earlier this week, he apologised for repeatedly placing his hand on journalist Julia Hartley-Brewer’s knee.
Ms Hartley-Brewer has said that she was not hurt, and has no problem with Mr Fallon.
Today she told Sky News: “If his resignation is over kneegate, him touching my knee 15 years ago and me not having any issue with it today, this is the most insane, absurd and ridiculous resignation of a Cabinet minister ever.”
In his resignation letter, Mr Fallon said: “In the pat I have fallen below the high standards that we require.”
Who is Gavin Williamson?
Mr Williamson was appointed chief whip by Theresa May when she became Prime Minister in June 2016, after serving as her campaign manager during the General Election.
Around the same time, he was appointed to the Queen’s Privy Council, and was given a CBE in David Cameron’s resignation honours.
He is known in Westminster for keeping a pet tarantula named Cronus in a glass box on his desk, which is said to have provided added menace when dealing with errant MPs.
“You have to look at all different ways to persuade people to vote with the Government and it’s great to have Cronus as part of the team,” he said.
He added that the spider was “a perfect example of an incredibly clean, ruthless killer”.
Mr Williamson voted Remain in the EU Referendum, and is thought to be part of a group of Cabinet MPs who back an “off-the-shelf” transition deal, according to analysts Cicero.
Last month he was likened to House of Cards character Frank Underwood after giving a sinister speech at the Conservative Party Conference.
In the speech, he said: “I don’t very much believe in the stick, but it’s amazing what can be achieved with a sharpened carrot.”
When Mr Cameron was Prime Minister, Mr Williamson had served as his parliamentary private secretary.
Before that he had worked for former Transport Secretary Patrick McLoughlin and the former Northern Ireland Minister Hugo Swire.
He entered politics in 2001, when he was elected as a country councillor.
He stood down in 2005 to contest run in the general election, contesting the Blackpool North and Fleetwood seat. He came second to Labour’s Joan Humble, who had held the seat since it was created in 1997.
In 2010 Mr Williamson was elected as MP for South Staffordshire in 2010, winning 53.2 per cent of the vote.
Born in Scarborough, Yorkshire, Mr Williamson studied at Bradford University before working in manufacturing.
Up until he was elected MP, he worked as the managing director of an architectural firm.