Parsons was named chief executive officer three days after Sterling's longtime top lieutenant, Andy Roeser, was placed on indefinite leave as team president, and more than a week after the NBA banned Sterling over racist comments that sparked outrage from players, fans and commercial sponsors.
Sterling, 80, who has owned the Clippers for 33 years, now faces an attempt by the league to force a sale of his franchise in a scandal that has unfolded during the team's best season on record.
An NBA committee of 10 fellow owners or their representatives initiated the process of terminating Sterling's ownership by voting unanimously last week to move ahead "as expeditiously as possible."
Parsons, 66, a senior consultant at the investment firm Providence Equity Partners and a one-time member of President Barack Obama's economic advisory team, is one of a relatively few African-Americans to have headed major U.S. corporations.
He joined Time Warner in 1995 as president of the media conglomerate and was chairman and CEO there from 2002 until 2008. He later served as chairman of Citigroup until stepping down from that post in 2012.
"I believe the hiring of Dick Parsons will bring extraordinary leadership and immediate stability to the Clippers organization," NBA Commissioner Adam Silver said.
Parsons himself played college basketball while attending the University of Hawaii and went on to earn a law degree.
Beginning his career in the 1970s as a staff lawyer for then-New York Governor Nelson Rockefeller, Parsons followed Rockefeller to Washington when he was named U.S. vice president by President Gerald R. Ford in the aftermath of Watergate.
In his own statement, Parsons said: "Like most Americans, I have been deeply troubled by the pain the Clippers' team, fans and partners have endured." He also praised the coach, players and staff for showing "great strength of character during a time of adversity."
Sterling came under fire on April 25 when the website TMZ.com posted an audio recording with a voice said to be his criticizing a female friend for associating with black people.
Four days later, the NBA fined Sterling $2.5 million and banned him from pro basketball for life.
Silver also has called on the league's 29 other owners who sit on the NBA's governing board to force Sterling to sell the Clippers, a first-time use of such a sanction that would require a three-quarters vote by the board.
Sterling has not publicly addressed the controversy, but experts have said they do not expect him to give up his team without a fight.
He purchased the Clippers in 1981 for $12.5 million when the team was still based in San Diego and moved the club to Los Angeles in 1984. The team is now estimated to be worth at least $575 million, according to Forbes magazine, but some have estimated it could fetch as much as $1 billion.
Sterling's wife, Shelly, who shares ownership of the team through a family trust, issued a statement on Friday endorsing Parsons as interim CEO, calling him "an ideal choice to run the franchise until the ownership issues are clarified."
Shelly Sterling has said she intends to defend her 50-percent ownership interest in the Clippers in court.