Mahmoud Abbas, the Palestinian president who is a moderate from the defeated Fatah movement, administered the oath to some of the cabinet ministers in a brief ceremony at Gaza City's parliament building on Wednesday.
With Israel banning the travel of Hamas leaders between the West Bank and Gaza, the remainder of the ministers held a separate ceremony in the West Bank. The two settings were hooked up by videoconference.
The ceremony, which came just a day after Israel's nation election, ended a two-month transition period of ambiguity since Hamas' election victory in January.
Hamas insists it will not give up the Palestinians' right to armed resistance.
For his part, Israel's presumed prime minister-designate, Ehud Olmert, has countered that if Hamas will not agree, he will set the borders of a Palestinian state by himself and keep large areas of the West Bank.
The first to be sworn in on Wednesday was Ismail Haniya, who walked along a red carpet, then placed his hand on a copy of the Muslim holy book, the Quran, laid out on a low table.
Haniya, as the new prime minister, pledged to be "loyal to the homeland and its sacred places". Abbas looked on, his face expressionless.
Meanwhile, the US has ordered its diplomats and contractors not to have any contacts with Palestinian ministries now that a Hamas-led government has been sworn in, US officials said.
The directive, distributed to US officials in the region by email, bars them from having contacts with Hamas-appointed government ministers, whether they are members of Hamas or not, as well as with those who work for them, US officials said.
Hamas officials cannot expect
any contact with US officials
The US hopes to sideline Hamas and pressure it to recognise Israel, renounce the armed struggle and abide by peace accords. Hamas, branded a terrorist organisation by Washington, won Palestinian elections in January.
Speaking to Aljazeera.net in the run up to the swearing in of the new government, Haniya said that Hamas had repeatedly made the position on recognising Israel, and the issue of borders, clear.
"Why are answers needed over and over again for questions which have been responded to?" he said.
"We ask that the international community demand that Israel recognise the rights of Palestinians for once and to recognise a Palestinian state. Then, for sure, we will have a response to this question."
In a speech to parliament on Tuesday, Haniya urged the United States to modify its stance and "not to punish the Palestinian people for their democratic choice".
Hamas leaders have also said that Israel has not yet recognised Palestinian rights or abided by peace accords that should have afforded Palestinians a state long ago.
The US decision will limit a wide range of US programmes, including security co-ordination through the Palestinian Authority's Ministry of Interior.
Contacts will still be permitted with Abbas, his personal office and non-Hamas members of the Palestinian parliament.
The order takes effect from 6pm (1600 GMT) on Wednesday.
A US official familiar with the directive said the ban on contacts would also apply to independents and technocrats in the new Hamas government because they were "invited to join the government by a Hamas prime minister and are in that position as a virtue of a vote of confidence by a Hamas-led PLC (parliament)."
US law bars the government from providing direct assistance to any group that is on the State Department's list of "banned terrorist organisations".
Laila el-Haddad in Gaza contributed to this article.