Pope Leo XIV appointed Francis Li Jianlin to replace Joseph Zhang Weizhu under a controversial deal with China on the appointment of bishops, the Vatican statement said.
It said Zhang Weizhu had resigned.
According to Catholic newspaper The Tablet, Li Jianlin was one of two people "elected" bishops by Chinese authorities unilaterally in the week after Pope Francis's death in April.
The Vatican is unable to ratify appointments of bishops during the power vacuum caused by the death of a pope.
The appointment in the city of Xinxiang in the northern Henan province was "particularly contentious" because the Vatican had recognised Zhang Weizhu as the legitimate bishop of the diocese, The Tablet said.
Zhang Weizhu is a member of the "underground" Chinese Catholic Church, which is not recognised by the Chinese government.
He was detained most recently in May 2021 and remains in custody without trial, according to the US Commission on International Religious Freedom.
The Vatican gave no details of his whereabouts.
The Vatican and China do not have formal diplomatic relations because the Holy See recognises Taiwan, the self-ruled island that Beijing claims as its own territory.
However, they agreed in a historic deal in 2018 to let both sides have a say in the naming of bishops in China, home to about 12 million Catholics.
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