Palestinian president Mahmoud Abbas has praised the "end of a Palestinian division" as he swore in a unity government under a unity deal with the Islamist militant group of Hamas, which rules the Gaza Strip.
The leader of moderate Fatah movement said the new cabinet, formed of 17 members, would also include five ministers from Gaza and would strive to pursue peace with Israel.
The new administration took the oath of office in Ramallah, the headquarters of government in the Israeli-occupied West Bank. Three ministers from Gaza were denied entry to the West Bank by Israel.
"Today, with the formation of a national consensus government, we announce the end of a Palestinian division that has greatly damaged our national case," Abbas said.
Earlier, a dispute between Hamas and Fatah broke out as the Islamist group said it would oppose a cabinet without the ministry for Prisoners Affairs.
Sami Abu Zuhri, a Hamas spokesman, said the Islamists would not accept a government without that ministry and that it was their "final decision".
An agreement was reached later as prime minister Rami Al-Hamdallah accepted also the post of Prisoners Affairs to resolve the dispute.
The Palestinian Authority split in June 2007, when Hamas forced the PLO out of Gaza in a brief civil war that left more than 100 dead and 500 wounded.
Israeli prime minister Benjamin Netanyahu has appealed to world leaders not to recognise the new Palestinian government, saying it would serve as a front for Hamas and "strengthen terrorism".