Khan was named the head of the faction shortly after Nazir and 12 other militants were killed in the drone strike in Angoor Adda area on Thursday.
He fought as a militant in Jammu and Kashmir, sources were quoted as saying in Pakistani media reports.
A member of the Kakakhel sub-tribe of the Ahmedzai Wazirs, Khan is an illiterate former bus driver.
The 34-year-old father of two also ran a hotel. He fought alongside the Afghan Taliban before the 9/11 terror attacks.
Khan, who is also known as Salahuddin Ayubi, was chosen by the 'Shura' (council) of the Mullah Nazir group and elders of the Ahmedzai Wazir tribe.
A report in The News described Khan as "tough and inflexible" while the BBC reported that he is "seen as hot-tempered, unlike his predecessor".
The Mullah Nazir group is one of the three Taliban factions based in the tribal belt that preferred attacking US and allied forces in Afghanistan instead of Pakistani troops.
Nazir had finalised a peace deal with Pakistani security forces in 2007 and was considered to be among "good" Taliban.
Khan is a long-time associate of Nazir and is expected to continue his predecessor's policy of maintaining peace in South Waziristan while focussing on attacks on foreign forces in Afghanistan.
US intelligence officials told The Long War Journal, a website that closely tracks the war on terror, that Khan is closely allied with Al Qaeda, the Afghan Taliban and a plethora of terrorist groups in the area.
"Little will change with Khan's appointment to lead Nazir's faction of the Taliban," one unnamed US official said.
"It will be business as usual, and we'll continue to have to take shots at Al Qaeda leaders and others in the Wazir areas" of South Waziristan, the official said.
The US intelligence officials denied reports that the Pakistani military and government aided in the drone strike against Nazir.
They said the Pakistanis were "upset over the killing".
"These reports (that Pakistan aided in Nazir's death) are preposterous," said one official involved in targeting Al Qaeda and other terrorist leaders in Pakistan.
"Nazir was an asset to and a tool of the Pakistani state," the official said.
"If the Pakistanis wanted to remove Nazir from the playing field, they could have easily done so," another intelligence official said. There is an army garrison in Wana, the main town of South Waziristan where Nazir operated, the official said.
"The Pakistanis are piqued that we've killed Nazir," another official said. "We just knocked off a good Taliban, or to them, perhaps the best Taliban."