The Irish back-row is preferred to Maro Itoje and Sam Warburton who are both named as replacements. Fellow Welshman, George North, is surprisingly left out of the 23 entirely.
Following a star turn versus the Chiefs on Tuesday however, Liam Williams has forced his way into the back three, alongside Elliot Daly.
Munster man gets nod
For Munster flanker O'Mahony, the honour of skippering the Lions side come after a strong team showing for the Irishman.
During the Six Nations back earlier this year, O'Mahony formed part of the solid pack that denied England a second-successive Grand Slam at the Aviva Stadium back in March.
The 27 year old is expected to line up versus New Zealand as a blind-side flanker to counteract the Kiwi threat at the breakdown.
North omitted, as Williams gets call
In arguably a surprise move, Warren Gatland left George North out of his squad completely, having been one of Welsh head coach's chief go-to guys for the international side.
As has full-back Leigh Halfpenny, who only makes the bench for the weekend's opening clash, as Gatland looks to win the physical battle in Auckland, rather than going on the offensive, with conditions set to favour the tourists.
A week ago, it was another of the Kiwi-born coach's reliant numbers, Liam Williams, who seemed a mile off the starting XV.
His second-half showing versus the Chiefs in Hamilton, only 24 hours ago however, has seemingly tipped the odds in his favour, as an electric wide asset in the Scarlets' winger's locker.
All Blacks go without Savea
Shortly before the Lions named their XV, Steve Hansen selected his strongest side for the first showdown of the tour - with surprises of his own.
The All Blacks' coach Hansen, caused a surprise when naming his side for the First Test, dropping left winger Julian Savea in favour of the 20-year-old Rieko Ioane.
Ioane was a standout performer against the Lions earlier on this tour when dazzling for the Blues, and he will now start for his country for the first time in place of Savea who has accumulated 47 tries in his 53 Test's.
Elsewhere, a pair of injured Crusaders return, with Kieran Read captaining the All Blacks side from number eight, while Ryan Crotty will link up with Sonny Bill Williams in the midfield.
Lions team to face New Zealand:
Backs: Liam Williams (Wales); Anthony Watson (England), Jonathan Davies (Wales), Ben Te'o (England), Elliot Daly (England); Owen Farrell (England), Conor Murray (Ireland).
Forwards: Mako Vunipola (England), Jamie George (England), Tadhg Furlong (Ireland); Alun Wyn Jones (Wales), George Kruis (England); Peter O'Mahony (capt, Ireland), Sean O'Brien (Ireland), Taulupe Faletau (Wales)
Replacements: Ken Owens (Wales), Jack McGrath (Ireland), Kyle Sinckler (England), Maro Itoje (England), Sam Warburton (Wales), Rhys Webb (Wales), Jonathan Sexton (Ireland), Leigh Halfpenny (Wales).
Joe Moody, Codie Taylor, Owen Franks, Brodie Retallick, Samuel Whitelock, Jerome Kaino, Sam Cane, Kieran Read (capt), Aaron Smith, Beauden Barrett, Rieko Ioane, Sonny Bill Williams, Ryan Crotty, Israel Dagg, Ben Smith.
Replacements: Nathan Harris, Wyatt Crockett, Charlie Faumuina, Scott Barrett, Ardie Savea, TJ Perenara, Aaron Cruden/Lima Sopoaga, Anton Lienert-Brown.