He partners Leinster team-mate Gordon D'Arcy in midfield with Ireland boss Eddie O'Sullivan rejigging his backline to compensate for the absence of skipper Brian O'Driscoll.
Llanelli flanker Easterby - another of the Irishmen to return from the Lions tour with his reputation enhanced - recently underwent surgery for a broken nose but has been cleared to take the number six jersey.
Easterby has been handed the captaincy with veteran number eight Anthony Foley - his closest rival for the job - dropping out of the squad altogether.
O'Sullivan revealed the decision to include 42-cap Easterby was made on Tuesday morning with Munster rookie Denis Leamy selected ahead of Foley at number eight. Johnny O'Connor completes the back row.
O'Sullivan said: 'We waited until the last minute before picking Simon because we had to get medical clearance.
'He had a scan [on Monday] and the specialist has given him the go-ahead. He's just come off the training field and is good to go.
'I said I'd go with the form team and that applies to the back row we've selected. All three players are good on the ball and are good defenders. It's the best combination we have available.'
There are no debutants in the starting line-up but uncapped Ulster duo Rory and Neil Best have been named on the bench.
Ireland have never beaten the All Blacks and are rank outsiders to break that duck this weekend.
Graham Henry's men swept aside Wales 41-3 in the opener last weekend and Ireland face a difficult task to halt the tourists' march to a clean sweep of home union scalps.
O'Sullivan has prepared for the match without his two most inspirational figures, O'Driscoll and second row Paul O'Connell, while Denis Hickie, Alan Quinlan, Guy Easterby, Eric Miller and Frankie Sheahan are also in the treatment room.
O'Driscoll is recovering from the shoulder injury he suffered during the opening Lions Test in Christchurch when All Blacks skipper Tana Umaga and hooker Keven Mealamu performed a controversial 'spear' tackle.
The potential flashpoint of Umaga coming up against O'Driscoll's countrymen has been avoided, however, with the veteran centre rested for the Lansdowne Road match.
Ireland team to face New Zealand at Lansdowne Road on Saturday (1430):
G Murphy (Leicester); T Bowe (Ulster), G D'Arcy (Leinster), S Horgan (Leinster), A Horgan (Munster); R O'Gara (Munster), P Stringer (Munster); M Horan (Munster), S Byrne (Saracens), J Hayes (Munster), D O'Callaghan (Munster), M O'Kelly (Leinster), S Easterby (Llanelli, capt), J O'Connor (Wasps), D Leamy (Munster).
Replacements: R Best (Ulster), S Best (Ulster), M McCullough (Ulster), N Best (Ulster), K Campbell (Ulster), D Humphreys (Ulster), G Dempsey (Leinster).