Ahmed, 31, a former refugee who became an Australian citizen last month, replaces Xavier Doherty, who played in the ICC Champions Trophy in England last June.
Chief selector John Inverarity said Ahmed has an opportunity to be the squad’s lead spin bowler.
“Fawad has been a consistent wicket-taker on the Australia A tour of Zimbabwe and South Africa,” Inverarity said.
“He is a very good and mature leg-spin bowler and the selection panel is keen to see how he fares in international competition.”
Elsewhere, batsmen Steve Smith, Aaron Finch and Shaun Marsh were included in the squad, along with paceman Josh Hazlewood.
Smith replaces Mitchell Marsh.
“Steve is a talented young stroke-maker who is steadily gaining confidence and has been impressive at times during the Ashes series and Australia A tour that preceded it,” said Inverarity.
“Mitchell is still only 21 years of age and is a player who remains of high interest.”
Finch was included after playing five consecutive ODIs against the West Indies last southern summer, along with captaining Australia A against South Africa A, Zimbabwe and India A in Africa.
“He has played and captained with considerable success and the selection panel looks forward to him continuing his form in England,” he said.
Inverarity added that Hazlewood and Marsh had both performed impressively recently with Australia A and thoroughly deserved their opportunity.
The squad was chosen with next year’s ICC World Twenty20 and the 2015 ICC Cricket World Cup in mind, the chief selector said.
Australia play two T20s against England, an ODI against Scotland in Edinburgh and the five ODIs against England between August 29 and September 16.
The squad will be reduced to around 15 players after the T20 matches which will be captained by George Bailey.
Australia: Michael Clarke (ODI captain), George Bailey (T20 captain), Fawad Ahmed, Nathan Coulter-Nile, James Faulkner, Aaron Finch, Josh Hazlewood, Phil Hughes, Mitchell Johnson, Shaun Marsh, Glenn Maxwell, Clint McKay, Steve Smith, Mitchell Starc, Adam Voges, Matthew Wade, David Warner, Shane Watson.