The 70-year-old "Gol Maal" star will head the 17-member jury, which will select the country's official entry in the best foreign category of the 88th Academy Awards.
Palekar, whose film "Paheli" was India's official entry for the Academy Awards in 2005, said his appointment is just the part of a process and there is nothing special about it.
"I feel like laughing on one hand and feel scared on the other. Why are we creating hullabaloo? Just because I have been appointed chairman of a committee where there are 16 other members, it is not that I am going to do something individually and take the Indian flag there (Oscars)," Palekar told PTI in an interview.
Palekar knows he is up for a mammoth task of choosing the best representative of Indian cinema for the coveted international award from a plethora of Bollywood and regional films.
The actor said it will not be easy and will invite a lot of scrutiny.
"To select one such film is an enormously difficult task because ours is probably the only industry in the world, which has such wide variety of films. Right from Bollywood masala mainstream cinema to regional cinema.