The 24-test veteran, who captained the Reds to this year's Super Rugby title, missed out on being named in the Australian World Cup squad four years ago.
Horwill takes over the captaincy from Rocky Elsom, who remains in the World Cup squad.
Meanwhile, Matt Giteau has missed out on a World Cup spot, while Berrick Barnes returns from a head injury to take his place in the squad.
The Wallabies open their World Cup campaign against Italy at North Harbour Stadium on September 11.
Wallabies World Cup squad:
Backs - Kurtley Beale, James O'Connor, Drew Mitchell, Digby Ioane, Adam Ashley-Cooper, Rob Horne, Pat McCabe, Anthony Faingaa, Berrick Barnes, Quade Cooper, Nick Phipps, Luke Burgess, Will Genia.
Forwards - Ben McCalman, Radike Samo, Wycliff Palu, David Pocock, Rocky Elsom, Scott Higginbotham, James Horwill (capt), Rob Simmons, Nathan Sharpe, Dan Vickerman, Ben Alexander, Sekope Kepu, James Slipper, Salesi Ma'afu, Stephen Moore, Saia Faingaa, Tatafu Polota-Nau.
