Immediately after the inauguration, Islamist Shi'ite leader Ibrahim al-Ja'fari, who opposed Saddam Hussein for decades in exile, was officially appointed prime minister. The prime minister's position is the most powerful position in the new government.
Many observers say today's moves reflect significant progress toward stabilization.
The ceremony took place in Baghdad's heavily fortified Green Zone, in front of hundreds of lawmakers and religious and political leaders.
"I swear to God [that] I will accomplish my legal duties and responsibilities with full devotion and sincerity, look after the interests of [Iraq's] people, of its sky, its water, its riches, and its democratic federal system, work on preserving public and private freedoms, the independence of the judiciary, and be committed to apply the legislation with honesty and neutrality," Talabani pledged. "As God is my witness."
Talabani also proposed an amnesty for insurgents and called for reconciliation with the country's former Sunni elite, as he did in remarks yesterday.
"We have a program," Talabani said. "Our brothers, the Sunnis especially, should take their place and get their full rights. While we are Kurds, we are also Sunnis. In consequence, we will defend our brothers the Arab Sunnis."
Shi'ite politician Adel Abd al-Mahdi, who was finance minister in the outgoing government, and former interim President Ghazi Ajil al-Yawir, who is a Sunni, were sworn in as vice presidents. The three comprise the Presidential Council, which immediately named Ibrahim al-Ja'fari -- a member of the 60-percent Shi'a Arab majority -- prime minister.
Parliament speaker Hajim al-Hassani said outgoing Prime Minister Ayad Allawi had turned in his resignation, but was asked to conduct the day-to-day work of the government until a new cabinet is named.
The appointments cement the power shift that has taken place in Iraq following the toppling of the Sunni-dominated regime of Saddam Hussein. Shi'ites and Kurds effectively run the country, after being oppressed for decades.
U.S. President George W. Bush, whose administration led an international coalition to depose Hussein in 2003, called the developments a "momentous step forward in Iraq's transition to democracy."
Prime Minister al-Ja'fari has two weeks to pick his cabinet, including the crucial posts of defense minister and oil minister.
"We want to have ministers of both genders -- men and women," al-Ja'fari said yesterday. "We want to have Arabs along with Kurds, Turkomans, etc. -- [representatives] of all colors. I think that if the cabinet focuses essentially on the matter of choosing qualified people, and if it takes into consideration the diversity [of society], it will succeed in its work."
The new government faces many tough issues.
Lawmakers must draft a permanent constitution by mid-August. There is also the future of the oil-rich city of Kirkuk and the task of getting Iraq's national army up to speed.
Kamran al-Karadaghi, an expert on Iraq who works at the Institute for War and Peace Reporting in London, said he believes the weeks following the 30 January elections in Iraq mark a milestone in the country's transformation.
"Despite all the difficulties in Iraq -- the insurgency, the security situation -- despite all the attempts to instigate a Sunni-Shi'a civil war, nothing of this happened," al-Karadaghi said. "No matter how difficult it is, the Iraqi groups are really managing to cooperate and to work together -- with delays, with problems, with differences. But in the end, they are all capable of finding a kind of consensus among themselves."
He said much of the credit should go to ordinary Iraqis, noting that there has been no real fighting between ethnic groups in Iraq, even in areas where such tensions are high, such as the northern city of Kirkuk.
"Iraqi Assembly Elects Talabani President"
"Iraq: Presidential Choice Is Landmark For Kurds"
[For more on events in Iraq, see RFE/RL's dedicated webpage.]