Warburton led the victorious 2013 tour of Australia.
"Sam is a great player, an outstanding leader and a winning Lions captain," said Gatland. "The coaching team believe that Sam's experience and leadership qualities make him an obvious choice as captain."
England captain Dylan Hartley is the biggest name casualty. The New Zealand born hooker is the third successive England skipper to miss out on Lions selection after Steve Borthwick and Chris Robshaw in 2009 and 2013 respectively.
While Hartley was omitted, his England understudy, Jamie George, was included, along with Ireland captain Rory Best and Wales's Ken Owens.
The 2017 Six Nations champions England boast the largest contingent of 16 players in the 41 man squad. Wales had 12 and Ireland 11 with Scotland's two representatives full-back Stuart Hogg and wing Tommy Seymour.
"There's been healthy debate about the squad," said Lions coach Warren Gatland. "And now that it's been announced we need to get behind it 100 percent and get excited about travelling to New Zealand.
"There's competition for places and there will be players fighting for Test spots with no clear number one, number two or number three in certain positions."
The 53-year-old New Zealander, who has been on secondment from his post as Wales coach, added: "That's what makes us pretty excited about the quality of the squad going to New Zealand. We know how tough it will be. This is the toughest tour."
Four years ago, Gatland steered the Lions to a victorious tour of Australia and he will be aiming to become the second Lions coach to win a Test series in New Zealand.
The 10-match tour begins with a game against a Provincial Union side in Whangarei on 3 June with the first of three Tests against the All Blacks in Auckland on 24 June.
"In previous tours the midweek games tended to be a little easier," Gatland said. "But when you look at the quality of the opposition we're facing in midweek, it's going to be hugely challenging.
"That's why we've taken a few extra players than we did in 2013, we just needed to make sure we have the depth and quality in the squad to make sure we can handle the quality of the sides we're coming up against."
"I had a dinner with all the other former Lions captains on Tuesday night and that's when it sunk in, the enormity," said Warburton after the squad was announced. "I found out last Thursday that I'd be skipper. I was in a supermarket car park when the coach called. I didn't believe him at first. I thought it was the lads from the team winding me up."