In a news release Monday, Haslam’s office said Rausch brings a wealth of experience and proven leadership to the agency. He will become director effective June 25.
Rausch has served as Knoxville’s police chief since 2011 and oversees more than 500 employees, including about 400 sworn officers. He joined the department in 1993 and rose through the ranks.
A U.S. Army veteran, Rausch served in the Military Police Corps from 1986 to 1990.
Haslam picked Rausch over two other finalists: TBI Acting Director Jason Locke and Tennessee Board of Parole member Tim Gobble.
Former TBI Director Mark Gwyn retired last month after three decades with the agency.
The Tennessean reported that Locke was the subject of an internal investigation after "accusations" about him were shared with Haslam.
Haslam spokeswoman Jennifer Donnals said Haslam's office received an emailed complaint from Kim Locke, Jason Locke's wife, Friday.
"We referred the allegations in the email to law enforcement," Donnals said.
Investigators are looking into "the accusation of misuse of state funds" after the complaint was submitted, Tennessee Bureau of Investigation spokesman Josh DeVine said in a statement.