This could mean unrest for Distin, who has been linked with a few other Premiership clubs, but City boss Stuart Pearce insists he discussed the matter with Distin before deciding to make Dunne the new skipper.
"This will allow Sylvain to concentrate more on playing," he told the City website. "I spoke to him at the end of last season, it was a decision that we both agreed to. It's not a snub to Sylvain in any way, shape or form - he did an extremely good job captaining the side.
"It was almost impossible for me not to give him the captaincy because he's come so far of late," he added. "Richard's settled down, has a lovely girlfriend and a new baby, and he's a model professional both on and off the pitch.
"Richard has got a maturity now. Since I've been at the club, his ability and professionalism have improved and the respect for him in the dressing room is immense. I just felt it was the right time to make that change.
"As a manager you sometimes do things with a gut feeling, and I have a gut feeling that Richard will wear that armband with pride, and the extra responsibility will take him up to the next level as a player as well."
"It's an honour," Dunne added. "There are some really great players in the team, players with experience and ones that have done much more than me so I am really pleased to be asked to be captain.
"Some great names have captained City down the years, and even in my time here as well. Right now there are the likes of Cole, Hamann, Jamo and Dickov who could all do it, so to be asked is a real honour for me."
Dunney became a father for the first time just before the end of last season.
"When you become a father you grow up straight away," he said. "And this added responsibility from the manager is something that I appreciate and I am really looking forward to taking on."