The appointment was made during a special council meeting.
Baker, who was elected to the council last year, became mayor after Donald Sanders resign-ed the position in January.
Sanders said the position needed someone who could devote more time to it than he could. Sanders works full time for the Cherokee Electric Cooperative.
Baker had previously served two terms on the council.
Sanders replaced the late Bob Davis, who resigned last year, saying he had made mistakes.
Cedar Bluff town government was the subject of a federal investigation that found several improprieties including the improper removal of firearms from the Police Department and forged checks.
Council and Mayor Baker have said they are trying to get the town back on track.
Council has put into place stricter controls on spending. All city cell phones have been returned and credit card limits have been lowered.
At last weeks regular council meeting, building inspector Jimmy Wallace reported that building permits are up over last year, and the town will soon get its first condo development.
But financial difficulties remain. Baker told a resident who requested roadwork at the last council meeting that there is no money at the moment for patching roads.
Crista Neyman, who ran for -- and narrowly lost -- the council seat in the last election, was nominated for the District 3 seat by Councilman Rick Sides.
Councilwoman Billie Burkhalter nominated Pearson and the vote passed 5-1