Italy's new cabinet was sworn in on Thursday morning sealing an alliance between the populist Five Star Movement (M5S) and the centre-left Democratic Party (PD).
It relegates Matteo Salvini's far-right League movement to the opposition.
Guiseppe Conte remains as Italy's prime minister and now leads a team of 21 ministers — 10 from M5S, 9 from PD, one independent and one from the left-wing Free and Equal party. Only seven of them are women.
Luigi Di Maio, formerly deputy prime minister and minister for industry and labour, is now the country's foreign minister.
The crucial economy ministry was given to PD's Roberto Gualtieri, the chairman of the European Parliament's Committee on Economic and Monetary Affairs, while independent Luciana Lamorgese will replace the League's firebrand leader, Matteo Salvini, at the interior ministry.
Lamorgese, the first woman to lead the Milan prefecture, is a veteran at the interior ministry, which she first joined in 1979. Over the past decade, she has primarily worked on migration and the integration of refugees and migrants.
The appointments have been welcomed by financial markets who see them as less likely to clash with Brussels. Italian bonds have rallied strongly over the past week, with 10-year yields touching a new record low of 0.803% on Wednesday. They were above 1.5% at the start of August.
European Commission President Jean-Claude Juncker congratulated Guiseppe Conte for his new government and his "leadership" in a letter on Thursday.
"I am convinced that Italy will be able to play an important role in addressing these truly European challenges, living up to its responsibilities as a founding member of our Union," he added.
The country was plunged in a political crisis in early August when Salvini pulled the plug on the League-M5S coalition in the hope of triggering new elections that he hoped would see the League rule alone.
But although a coalition has been agreed, it doesn't mean the country is fully out of its political uncertainty.
"While Italy's new government will improve the mood between the EU and Rome, there's little room for pro-Europeans to be complacent. First of all, the government may not last long. The Five Star Movement and Democratic Party have spent the last few years attacking each other and it will be difficult to establish trust," Luigi Scazzieri, a research fellow at the Centre for European Reform think tank, wrote in a note on Thursday.
He also warned that the League, although now out of government, is not to be discounted.
"The new government is likely to face stiff opposition from Salvini and the League," he wrote, adding that while the crisis has dented Salvini's popularity, " it is a mistake to think he will not recover."
"In opposition, his rhetoric will be even sharper than it was in government, and the League will become even more radical and eurosceptic," Scazzieri said, flagging that as other right-wing parties become weaker, Salvini could impose his dominance and return the League "to power at the head of a right-wing coalition that puts Italy on a collision course with Brussels."
The new government will only be fully operational once it has been approved by both houses of parliament.
The votes scheduled for Monday and Tuesday.