Breen will compete alongside Nagle for the final time at Rally Spain later this month, which will mark the latter's 102nd and last WRC event, before hanging up his helmet on a career that has included five WRC wins alongside Kris Meeke and 18 podium finishes in total.
After evaluating a number of candidates, Fulton has been selected to fill Nagle's shoes for Japan and for the 2023 campaign.
The 30-year-old Irishman has been on hand with Breen and Nagle at numerous WRC events this year, while competing in WRC2 alongside compatriot Josh McErlean.
To assist with his transition to the Rally1 car, Fulton has already been attending pre-event tests with Breen.
"I don't have a huge amount to say other than that I am delighted to get the opportunity, it's something that I have been aiming towards for a while now, naturally, like any co-driver to get to the top-level," said Fulton.
"I have been working with Craig for quite a while now and I have done a couple of tests in the Puma so I am really looking forward to developing the relationship with him and the car as well as with the team.
"I am looking forward to getting stuck into it and doing the best possible job."
While admitting it will be strange to compete without Nagle alongside him, having been paired together since 2019, Breen is confident Fulton can successfully slot into the co-driver seat in the #42 Ford Puma.
"Paul and I had been talking about this for a while, and I can completely understand his thinking," said Breen.
"He's been competing at the highest level for a long while and he wants more time with his family. But it's still going to be strange without him.
"I have every confidence in James. He has good experience; he's been on the most recent tests with us and he's going to be in the car for Japan - that gives him good experience ahead of next season.
"Paul will also be joining us in Japan, just to settle everything in and give James plenty of reassurance.
"He's done the best part of two years in the World Rally Championship, but it's still going to be a step for him - but I'm sure he's got it covered.
"He's watched so many of the onboards and has seen so many stages that way, it already feels like he's been sitting alongside me for a while."
The Breen/Fulton pairing will make their WRC debut at Rally Japan from 10-13 November.
