By Ilan Brat and Joann S. Lublin

Updated Feb. 23, 2015 3:28 p.m. ET

Darden Restaurants Inc. named interim chief Eugene Lee Jr. to the permanent CEO job, signaling that a board revamped by an activist investor has grown confident that an insider can engineer the company’s turnaround.

Mr. Lee, an eight-year Darden veteran, took the helm at the owner of the Olive Garden and LongHorn Steakhouse chains in a temporary capacity in October after shareholders voted to replace the board with a slate of 12 directors nominated by activist shareholder Starboard Value LP. New York-based Starboard had blasted Darden’s management and called for sweeping changes, recommending everything from spinning off higher-end chains to salting the pasta water at Olive Garden.

Darden’s board has been impressed with the efforts of the 53-year-old Mr. Lee to bolster the company’s restaurant brands and employees’ attitudes, countering any resistance to the idea of hiring an insider, according to people familiar with the matter.

In December, Darden posted quarterly results that showed improvement at Olive Garden, with the chain posting its first positive quarter of same-store sales in more than a year and beating analysts’ expectations.

Darden, which changed search firms last fall to help it select a permanent CEO, narrowed its hunt to a short list of finalists earlier this month, one of the people said. Another contender was Bradley Blum, an outside Darden director elected last year and former head of Burger King and Olive Garden, said people familiar with the matter. Mr. Blum declined to comment through a spokesman.

Mr. Lee, previously president and chief operating officer, took over as Darden’s interim leader from longtime CEO Clarence Otis, who had come under pressure starting in 2013 from both Starboard and fellow activist Barington Capital Group LP.

Under Mr. Lee, a 30-year industry veteran, Darden introduced online ordering that increased Olive Garden’s takeout business, rolled out lower-calorie dishes and speeded up lunch service. Moving away from discounts, the company also instituted a $9.99 everyday-value menu to attract customers to Olive Garden.

“Gene has already done a terrific job improving the energy and attitude inside Darden and we expect the reinvigorated culture to continue to improve,” Jeffrey Smith, Darden’s nonexecutive chairman and CEO of Starboard, said Monday.

Mr. Lee is known as a hands-on restaurant operator who pays close attention to details. While dining at Darden-owned restaurants, he has at times confronted servers for failing to promptly refill water glasses, according to a longtime acquaintance who has dined with him. “He would get up and go to the individual server and the manager and say, ‘That’s not acceptable,’” this acquaintance said.

Mr. Lee’s plans for the Orlando, Fla., company aren't expected to completely align with a nearly 300-page investor presentation issued last year by Starboard, according to a different person familiar with the matter. That blueprint, heavy on financial engineering, called for cutting more than $200 million in costs and spinning off chains including The Capital Grille, Bahama Breeze and Yard House.

The company in November unveiled a plan to trim $20 million in annual costs that included eliminating a management layer at the Olive Garden and LongHorn chains and selling the company’s airplanes. At the time, Darden also announced that finance chief C. Bradford Richmond would be retiring, and on Monday the company said it was turning its focus to appointing his successor.

—David Benoit contributed to this article.

Write to Ilan Brat at ilan.brat@wsj.com and Joann S. Lublin at joann.lublin@wsj.com