The wrangling between an alliance of seven political parties and the former rebels over key positions including the deputy leadership post had delayed the formation of the new cabinet, in which the Maoists will hold five portfolios.
Formation of the new government has been eagerly awaited in Nepal, because the ex-rebels' inclusion in the government is part of the peace process that began last year.
It was decided on Friday which parties will take on which ministries, but the names of the ministers is yet to be finalised.
The landmark agreement on the formation of a joint government was reached late on Friday in a meeting between Koirala, leaders of the seven ruling parties and Prachanda, the leader of the former rebels.
Koirala is to continue as prime minister in the new government.
The government and rebels signed a peace agreement in November, halting a Maoist insurgency that killed more than 13,000 people.
Since then the rebels have locked up their weapons, confined their fighters to UN-monitored camps and joined parliament.