The U.S. Securities and Exchange Commission on Tuesday said it would tap New Jersey Attorney General Gurbir Grewal to lead its efforts to police Wall Street, signaling a change of direction after a previous pick was criticized by progressives.

Mr. Grewal, 48 years old, will become director of the SEC’s enforcement division on July 26, the regulator said.

His appointment comes after SEC Chairman Gary Gensler’s prior choice for the post, defense attorney Alex Oh, resigned after a few days into her tenure.

A longtime public servant with experience as a federal and county prosecutor, Mr. Grewal was appointed following criticism from some progressives that the SEC has been too quick in the past to choose lawyers with strong Wall Street ties to police the financial industry.

Ms. Oh, the first major hire under Mr. Gensler, served for 17 years as a white-collar defense attorney at law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP. Before moving to private practice, she also worked for four years as a federal prosecutor for the U.S. attorney’s office in Manhattan.

Ms. Oh was named enforcement division director on April 22. She resigned on April 28 after a federal judge questioned her conduct during a deposition in a lawsuit filed against Exxon Mobil Corp. , for whom she had worked while a partner at Paul Weiss.

In the aftermath of her resignation, several progressive groups called on the SEC to appoint an enforcement director without Wall Street ties. Critics of what has been called the revolving door between government, law firms and the financial industry say it feeds conventional thinking about how to investigate and resolve cases against banks and public companies.

Mr. Grewal isn’t entirely without experience representing corporations and their executives. In between stints in public service, he worked at law firm Howrey LLP from 1999 to 2004 and from 2008 to 2010, counseling clients on securities, antitrust and foreign bribery matters, according to a biography by the National Association of Attorneys General. Howrey dissolved and went bankrupt in 2011.

As New Jersey attorney general, Mr. Grewal oversaw the state’s Bureau of Securities and prosecuted cases related to predatory subprime automobile lending and the overcharging of credit card fees. He also handled cases related to opioids and gun control as well as lawsuits against the Trump administration.

Earlier in his career, Mr. Grewal led the economic crimes unit of the U.S. attorney’s office for New Jersey, which investigated and prosecuted major white-collar crimes and cybercrime in the state. He was also a federal prosecutor for the U.S. attorney’s office in Brooklyn, N.Y., where he was assigned to the business and securities fraud unit.

At the SEC, he will oversee a division of 1,300 people and help fashion a strategy for regulating Wall Street. Mr. Gensler, who previously led the Commodity Futures Trading Commission, is widely expected to ramp up enforcement against the financial industry in a way that hasn’t been seen in decades.

Mr. Grewal’s hiring also adds to the diversity of the SEC’s workforce. He was the first Sikh and the second South Asian to serve as state attorney general in U.S. history, according to a spokesman for the New Jersey attorney general’s office. The first South Asian state attorney general was Kamala Harris, who served as California’s AG from 2011 to 2017, before becoming a senator and vice president. President Biden has made diversity a priority when selecting candidates for top positions within his administration.

Write to Dylan Tokar at dylan.tokar@wsj.com