The 48-year-old leader of the Yisrael Beitenu [Israel is Our Home] party was sworn in on Monday after the parliament voted 61 to 38 to approve him joining the governing coalition as the nation's first-ever minister for strategic affairs.
Earlier in the day, cabinet ministers voted 22 to one on welcoming Lieberman into the government, where he will also hold the fourth deputy premier post and will coordinate efforts to counter arch-enemy Iran's nuclear programme.
"We are taking an important step to strengthen the government," Ehud Olmert, the Israeli prime minister whose own popularity ratings have slumped in recent months, said after the cabinet vote.
The prime minister reached out to Lieberman to shore up his support base in parliament, with his previously 67-member coalition weakened by this summer's war in Lebanon and a series of damaging scandals.
The addition of Yisrael Beitenu's 11 MPs gives Olmert's coalition 78 seats and a comfortable majority in the 120-member Knesset.
Ophir Pines-Paz from Labour, the only minister to oppose Lieberman's joining, announced his resignation as the cultural minister hours after the cabinet vote.
"From the moment the Israeli government decided to join ranks with Avigdor Lieberman and Yisrael Beitenu, which hold a platform with racist appearance... I had no alternative but to stick to my position," he told a news conference.
The arrival of Lieberman in the government marks a turn to the right for a cabinet that took office only in May on a lynchpin of Olmert's centrist Kadima party and its main coalition partner, the centre-left Labour.
Seen by his supporters as a desperately needed strong hand and by his foes as a racist demagogue, Lieberman was previously infrastructure and transport minister in 2001-2002 and 2003-2004, and is today the rising star of the right.
Lieberman has called for the transfer of land and populations to create homogenous Jewish and Palestinian states, and for the execution of Israeli Arab MPs who have had dealings with the ruling Palestinian Hamas movement, which Israel considers a terrorist organisation.