The 'Fashion Police' presenter will take over the role from 'Gossip Girl' star Taylor Momsen after the brand recently launched an appeal on its website, asking fans to choose their preferred celebrity ambassador for the label.
A close friend of Kelly's told the Sunday Mirror: "Kelly's always been a massive fan of Madonna and recently heard Lourdes idolised her, which she was very flattered by. It's a huge coup."
The new appointment could help to heal a rift between Madonna, 52, and Kelly's mother, presenter and rock manager Sharon Osbourne, who is renowned for her sharp tongue.
In 2005, Sharon said of Madonna: "She is full of s**t. I would like to punch her. She's a tart."
However a source revealed Sharon will support Kelly if she does take on the modelling gig, telling the Daily Star: "Sharon and Kelly are very, very close and she will support her daughter with all her heart, like she does all her children. If Kelly ends up modelling for Material Girl, it will be great."
Madonna launched the Material Girl range - which is aimed at teenage girls - in collaboration with her 14-year-old daughter Lourdes last year.