Despite former clashes with the Prime Minister over Brexit in the past, the 41-year-old politician is set to join her predecessor Baroness Goldie, who is now a Defence Minister, in the Scottish Tory leader role.
The Edinburgh Central MSP has been selected alongside former Chancellors Ken Clarke and Philip Hammond.
Ms Davidson stepped down from the Conservative leadership role in August last year after almost eight years.
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Her decision came after she had her son Finn and wanted to focus on being a mother.
She is set to stand down at the 2021 Holyrood election but if she becomes a peer, she could either depart from the Scottish Parliament earlier and spark a by-election or hold a dual mandate until next spring.
Ms Davidson, who campaigned for Remain ahead of 2016’s referendum, has repeatedly clashed with the Prime Minister over his approach to the UK’s departure from the EU.
She has previously said she felt "hopelessly conflicted" over Brexit which affected her role as leader of the Conservative Party.