The announcement was made by Dune author Brian Herbert on his Facebook page today.
Villeneuve has been a fast rising talent in the industry; his films have gained notoriety for their blend of high cinema with a variety of pulpy genre tropes. He's made espionage thrillers (Sicario), mystery thrillers (Prisoners), and has most recently ventured into sci-fi with the Oscar-nominated film Arrival and the upcoming Blade Runner 2049. He's probably one of the best candidates to tackle a new Dune movie project - as in, possibly one of the only directors versatile enough in both pulpy sci-fi and high art filmmaking to pull it off.
Villeneueve has previously stated that he wants to make a new version of Dune, so he is coming to the project with ideas in mind. Legendary Pictures must have a lot of faith in that vision, as the studio obtained the rights to Dune and started courting Villenueve as soon as he expressed interest.