Nepal's King Birendra administered the oath of office to Mr Bhattarai, leader of the victorious Congress Party of Nepal. A 16 member cabinet was also sworn in.

The party won a clear majority in the general elections, and Mr Bhattarai heads only the second majority administration since Nepal became a multi-party democracy nine years ago.

The BBC's correspondent in Kathmandu says that many Nepalis hope that Mr Bhattarai's coming to power will end years of political instability.

Signs of dissension

But there have already been signs of dissension within Congress party ranks. Critics have accused Mr Bhattarai of appointing only his supporters to cabinet posts.

The prime minister has retained several portfolios for himself, including defence, home and foreign affairs.

Mahesh Acharya takes over as finance minister, Govinda Raj Joshi is in charge of water resources and Chakra Prasad Bastola is agriculture minister.

Mr Bhattarai was appointed as prime minister last Thursday, after the Congress won 110 seats in the 205 member parliament.

The outcome brought to an end more than four years of unstable coalition governments.

The main opposition party in the new parliament will be the Communist United Marxist Leninists.

Most of the voting was peaceful

Nepal's Election Commission said the vote was the most peaceful since democracy was restored in 1990.

The election took place in 2 stages on 3 May and 17 May.

Focus on development

Mr Bhattarai's main tasks include poverty alleviation and providing better education and healthcare.

Political uncertainty in Nepal has brought the economy's growth rate down to one of the lowest in recent years.