Pujara was the lone new face in the team announced by the Cricket Board selection committee here.
Selection committee chairman Krish Srikkanth said the criteria for selecting the team was performance and fitness.
"We don't have to give any particular reason (for dropping Yuvraj). I think, performance and fitness... everything is taken into account. That itself answers the question," Srikkanth said when asked the reason behind Yuvraj's axing.
Ironically, Yuvraj has been named captain of the 'Rest of India' team which will take on Ranji champions Mumbai for the Irani Cup from October 1.
Srikkanth said by virtue of his fine performance in the domestic circuit, Pujara has powered his way into the national squad.
"Pujara has done very well in the domestic circuit in the last couple of seasons. He is a good player and also did well in the 'A' series. With the sheer weitage of his performace he has muscled his way into the team. You will have to give credit to his domestic performance," he said.
"We have given weightage to performance in domestic A series and this it how overall performance of every player has been taken into account. We have consulted (coach) Gary Kirsten and Dhoni and ultimately, this was the consensus," the chairman of selectors added.
As expected paceman Zaheer Khan, who was not picked for the Sri Lanka tour in July due to a shoulder injury, off-spinner Harbhajan Singh, who missed the third Test in Sri Lanka due to fitness issues, and S Sreesanth have returned to the squad.
While Zaheer replaced Munaf Patel, Sreesanth made his way into the squad at the expense of young Karnataka pacer Abhimanyu Mithun.
Among batsmen, opener Gautam Gambhir, who suffered a knee injury after the first Test in Sri Lanka, also returned to the Indian squad, which will be led by Mahendra Singh Dhoni.
Suresh Raina's impressive display with the bat in Sri Lanka paid rich dividends for him as he retained his place in the 15-member side along with other opener Virender Sehwag, and seniors such as Rahul Dravid, Sachin Tendulkar and VVS Laxman.
Tamil Nadu opener Murali Vijay also found a place in the squad as a back-up batsman.
Pragyan Ojha and Amit Mishra have retained their place in the spin department which will be spearheaded by Harbhajan.
Pujara has been a prolific run-scorer in the domestic circuit and for quite some time the right-hander was in the reckoning for a place in the national team.
The 22-year-old's dominance with the bat in domestic circuit can be gauged from the fact that he has so far made 14 centuries and 13 half centuries during his five-year-old first class career.
Srikkanth said he and his colleagues have selected a balanced team for the Test series against Australia.
"We have a strong batting line-up backed by some good bowling. We are confident of doing well against Australia," he said.
Indian team for Test series: Mahendra Singh Dhoni (capt), Virender Sehwag, Gautam Gambhir, Rahul Dravid, Sachin Tendulkar, V V S Laxman, Suresh Raina, Harbhajan Singh, Amit Mishra, Zaheer Khan, Ishant Sharma, S Sreesanth, Pragyan Ojha, M Vijay, Cheteshwar Pujara.
Rest of India team: Yuvraj Singh (capt), Abhinav Mukund, Shikhar Dhawan, Virat Kohli, S Badrinath, Saurabh Tiwary, Parthiv Patel, Piyush Chawla, R Ashwin, Jaydev Unadkat, Umesh Yadav, R Vinay Kumar, Manish Pandey, Abhimanyu Mithun, Ravindra Jadeja.