Leaders of the Palestinian militant group Hamas have taken formal control of the government after being sworn in by Palestinian leader Mahmoud Abbas.
No Hamas ministers have any experience of government
Ismail Haniya was sworn in as prime minister by Mr Abbas in Gaza, while several other ministers took the oath in the West Bank via video link.
The government faces serious problems at home, such as failing law and order and a broken economy.
And Hamas faces alienation abroad, with the US and Canada ending all contact.
US diplomats and contractors were ordered to cut contacts with all Palestinian ministries on the day the swearing-in ceremony was taking place.
"We will not have contact with members of Hamas, no matter what title they have," department spokesman Sean McCormack said.
US officials will still be able to maintain contacts with Mahmoud Abbas and non-Hamas legislators, the US consulate general in Jerusalem told the BBC.
NEW PALESTINIAN GOVERNMENT
Prime Minister: Ismail Haniya
Deputy PM & Education: Nasser al-Din al-Shair
Finance: Omar Abd al-Raziq
Foreign: Mahmoud Zahhar
Interior: Said al-Siyam
Justice: Ahmed al-Khalidi
Culture: Atallah Abu al-Sibah
Information: Youssef Rizqa
Health: Basim Naim
Religious affairs: Nayif al-Rujub
Labour: Mohammed al-Barghouti
Women's affairs: Mariam Salih
Canada announced it was suspending assistance to the Palestinian Authority, the first country to do so after Israel.
Foreign Affairs Minister Peter MacKay said Canada had no choice because Hamas had not addressed its concerns of "non-violence, the recognition of Israel, and acceptance of previous agreements and obligations."
The European Union has also demanded that Hamas soften its hardline anti-Israeli stance to qualify for aid, upon which the Palestinian Authority is heavily dependent.
Meanwhile the winner of the Israeli election, acting Prime Minister Ehud Olmert of the Kadima party, says he wants to annex parts of the West Bank to create the final borders of Israel, with or without reference to the Palestinians.
As the Palestinian parliament voted to accept Mr Haniya's cabinet on Tuesday, he said Hamas was ready for "dialogue" with international mediators about solving the Middle East conflict, and wanted "strong relations with Europe".
But he made no concession to Western demands to renounce violence and recognise Israel.
The new prime minister, Mr Haniya, was the first to take the oath of office in front of the Palestinian leader in Gaza.
Hamas leaders are banned from crossing Israeli territory to get to the parliament in Ramallah in the West Bank.
"I swear by gracious God to be faithful to the homeland and its consecrated sites, the people and its national heritage, to respect the constitutional system and law and to take care fully of the interests of the Palestinian people," he said.
The other members of the 24-strong cabinet, including one woman, then stepped forward.
The BBC's Alan Johnston in Gaza says the new Palestinian government faces many problems with a severe lack of experience.
None of its ministers has been in government before and they will take over ministries packed with officials loyal to the Fatah party, Hamas' bitter political rival.
However, Hamas is always disciplined, determined and focused, says our correspondent, and it is often a mistake to underestimate it.
Most Palestinians want it to succeed, and there will be crucial support from the Muslim world, where many people would like to see this Islamist government triumph over the Israeli and American efforts to break it.
With no prospect that Hamas will soften its anti-Israeli stance, however, the relationship with Israel can be expected to sink to new lows, our correspondent says.