Bukenya, whose appointment is subject to approval by parliament, was previously minister in the office of the president.
Museveni also sacked his first deputy premier, Interior Minister Eriya Kategaya, and made several changes in the cabinet.
Local government minister Jaberi Bidandi Ssali and outspoken Ethics and Integrity Minister Miria Matambe were removed from the government.
Doctor Kazibwe, Uganda's first woman vice president, had served in that capacity since 1994.
She resigned ostensibly because she wanted to pursue further medical studies in the US.
Kategaya, who was once considered the number two in Museveni's ruling "Movement"; Bidandi and Matembe have in recent months spoken out against calls by some politicians in the Movement to have the two-term limit for the president removed from the constitution.
Kategaya and Bidandi also kicked off a debate on political pluralism that culminated in the Movement's decision in March to ratify a resolution backing a return to multi-party politics.
Although political parties are allowed to exist in Uganda, they are not allowed to hold meetings or field candidates in elections, this being the sole prerogative of the ruling Movement, an entity that in theory embraces all Ugandans. - Sapa.
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