Hogg will start the Boxing Day derby at Murrayfield at 13 in a new-look midfield alongside Alex Dunbar, with Sean Maitland filling in at 15.
The 21-year-old Hogg earned a call-up to the British and Irish Lions squad that travelled to Australia in the summer on the back of his impressive displays at full-back during the RBS 6 Nations.
Townsend still sees that role as being his best position but for the RaboDirect Pro12 capital clash, he wants to put his star talent right in the thick of things.
The former Brive fly-half told Press Association Sport: "We want Stuart to get on the ball as much as possible and playing him at outside centre is one way to do that.
"He has got excellent basic skills. His passing, his kicking and when he runs onto the ball are all fantastic.
"He has played 10, he's played 13 and 15, so we think as the game goes on he can step up to become first receiver as well as an auxiliary full-back as well.
"Adaptability is key in the modern game. I love players who can play in as many positions as possible. We have got two or three that can do that, such as Richie Vernon who can play centre too.
"I see it as a big strength. From my time in France, they really rated players who could play in more than one position. They saw the game as being more than the set-piece and your starting position. It's about what you do off of kick returns or phase two to phase 20.
"In that sense you want as many rugby players in your team as possible."
Glasgow go into Thursday's encounter - which doubles as the first leg of the 1872 Cup - eight points ahead of their rivals.
As well as shifting Hogg further up the pitch, Tommy Seymour keeps his place on the right wing while DTH van der Merwe returns on the opposite side.
Duncan Weir has been named at fly-half, with Chris Cusiter wearing the number nine shirt and captaining the side in the absence of Al Kellock.
In the pack Ryan Grant comes back in at loosehead, with Pat MacArthur and Jon Welsh continuing at hooker and tighthead respectively.
Tim Swinson will combine with Tom Ryder in the engine room and in the backrow Rob Harley returns on the blindside, Tyrone Holmes continues at openside and Ryan Wilson keeps his place at number eight.
Townsend - whose side were left idle when Friday's clash with Treviso was rained off - added: "Everyone connected with the club is looking forward to these back-to-back games with Edinburgh.
"After the disappointment of having our game postponed on Friday night the players are ready to return to action. A bonus of not playing at the weekend is that we've been able to cover a lot in training over the last couple of days.
"We have a lot of respect for Edinburgh - and they have secured some great results in recent weeks. They have quality players throughout their team and a game plan that they execute well. It should be a cracking match."