The President of the main Nepalese opposition party, Girija Prasad Koirala, has been appointed prime minister by King Gyanendra.
Mr Koirala's Nepali Congress is the largest in an alliance of mainstream parties in the country.
Maoist rebels earlier announced a three-month ceasefire, and the parties who are to make up the new government promised to work with them, raising hopes of an end to the decade-old conflict.
The rebels are also lifting their blockade of the capital, Kathmandu, and other main towns.
However, they are insisting that work must begin quickly on rewriting the Nepalese constitution.
Parliament is due to sit again for the first time in four years tomorrow.
