Lydiate, the Wales flanker, has been asked to lead the side at AAMI Park after original choice as skipper Geoff Parling was withdrawn to protect him for Saturday's second Test against Australia.
"I'm over the moon, when (coach) Warren Gatland asked me I didn't hesitate to say yes. I'm chuffed to represent the boys as captain and really excited for tomorrow," Lydiate said.
"We flew in this morning and did our team run. Nothing changes really, the calls are the same it's just different voices. It's a massive honour to run out holding Bill the Lion.
"Saturday was a massive win and tomorrow we have the chance to prove ourselves and keep that momentum going into what will be an even bigger test."
Lydiate, whose captaincy experience has been limited to taking charge of the Newport-Gwent Dragons on a handful of occasions, intends to lead by example.
"I won't keep talking, talking gibberish. I'll just try to get my point across - lead as I play," he added.
"I'll go out there and play as hard as I can, that's me really. I won't try to over-complicate things and do things I don't usually do."
Ian Evans has taken Parling's place in the second row, with Tom Croft drafted onto the replacements' bench, while Manu Tuilagi will be making his first appearance since recovering from a shoulder problem.
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- Geoff Parling
- Warren Gatland