He'll line up alongside Irishman Conor Murray in the halves, as the Lions look to secure their first Test match victory in New Zealand since 1993.
Farrell's position at first-five - and not outside Sexton at second-five, as some predicted - suggests that boss Warren Gatland will continue to use the brawny, physical style that secured wins over the Crusaders and Maori.
Ben Te'o and Jonathan Davies start in the midfield.
Despite the selection, Gatland insisted his side couldn't rely on penalty goals alone against the All Blacks for victory.
"We have picked a side based on form with a lot of players putting their hands up, especially from the Crusaders and Maori games," Gatland said.
"We have continuously been strong at (the) set piece and have been good defensively in the last two or three outings but, to beat the All Blacks, you have to be courageous and play some rugby - you have to score tries."
Elsewhere, O'Mahony will form a loose forward trio with Taulupe Faletau and Sean O'Brien, while Alun Wyn Jones has been preferred to Maro Itoje in the second row.
In the back three, fullback Liam Williams and winger Elliot Daly retain their roles from Tuesday's win over the Chiefs, despite the short turnaround.
The pair both performed positively and did enough to start over the likes of Leigh Halfpenny, who has been benched, and the omitted George North.
Of the starting XV, seven players have Lions Test experience.
Gatland said: "It was a lively selection meeting. The win against the Chiefs was ... extremely important for the squad and some players played themselves into the side.
"We have continuously been strong at set piece and have been good defensively in the last two or three outings."
The pack is retained from the Crusaders victory, including the back row of O'Mahony, Sean O'Brien and Taulupe Faletau.
Gatland added: "It's a reward for how the back row has gone. There is a nice balance there while Peter captained the side against the Maori All Blacks and has done a good job."
"Elliot has been very accurate in the way he has played and we saw some excellent attacking play from Liam on Tuesday night," Gatland said.
"We are excited about the 15 that take the field but also the very strong and experienced bench players who will have an impact."
British & Irish Lions
15. Liam Williams - Scarlets, Wales
14. Anthony Watson - Bath Rugby, England
13. Jonathan Davies - Scarlets, Wales
12. Ben Te'o - Worcester Warriors, England
11. Elliot Daly - Wasps, England
10. Owen Farrell - Saracens, England
9. Conor Murray - Munster, Ireland
1. Mako Vunipola - Saracens, England
2. Jamie George - Saracens, England
3. Tadhg Furlong - Leinster, Ireland
4. Alun Wyn Jones - Ospreys, Wales
5. George Kruis - Saracens, England
6. Peter O'Mahony (capt) - Munster, Ireland
7. Sean O'Brien - Leinster, Ireland
8. Taulupe Faletau - Bath Rugby, Wales
Replacements
16. Ken Owens - Scarlets, Wales
17. Jack McGrath - Leinster, Ireland
18. Kyle Sinckler - Harlequins, England
19. Maro Itoje - Saracens, England
20. Sam Warburton - Cardiff Blues, Wales
21. Rhys Webb - Ospreys, Wales
22. Johnny Sexton - Leinster, Ireland
23. Leigh Halfpenny - Toulon, Wales
Additional reporting: AAP
