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The swearing in of the 25-member government -- which includes 11 new faces and two ministers who changed their posts -- comes more than a year after the last cabinet resigned in February 2011.
New ministers took over several key portfolios including that of the finance and justice ministries, an official list of the line-up showed.
After the cabinet resigned en masse last year, the Palestinian leadership said it would hold legislative and presidential elections "in the coming months," with Abbas tasking Fayyad to form a new government.
But the process was put on ice after the surprise announcement in April 2011 of a reconciliation deal between Abbas's Fatah movement and its Islamist rival, Hamas.
The agreement called for the creation of an interim cabinet of independents selected by the two factions, which would prepare for elections that were rescheduled to happen by May 2012.
The deal has largely stalled, and Abbas said on Wednesday that the impasse had left his administration paralysed, spurring him to call for the formation of a new cabinet.
But the Hamas government in Gaza slammed the decision to form a new cabinet, accusing Abbas's Palestinian Authority and the Fatah movement he heads of abandoning reconciliation.
"This strengthens the division," Hamas spokesman Fawzi Barhum told AFP, saying it "shows clearly that the Palestinian Authority and Fatah are far from implementing" the unity agreement.
In a bid to explain the decision, Abbas said he was "forced" to announce a new government after his Ramallah-based administration found itself unable to function.
And he also left the door open to an 11th-hour agreement with Hamas.
"If we reach an agreement with Hamas tomorrow or any time after that, this government will no longer have a role," he said.
"But I can't wait forever. A number of ministers have resigned from the current government, and now the administrative situation is paralysed."
Earlier on Wednesday, Abbas also moved to change the election law, which had until now stipulated that local elections must be held simultaneously across all of the Palestinian territories, local development minister Khaled Qawasme told AFP.
The amendment means that local elections can now be held separately in the West Bank and Gaza and do not have to take place on the same day, freeing up the Ramallah administration to begin planning a long-overdue vote, he said.
"Today president Abbas changed the local election law and gave the government the right to call elections in stages," Qawasme told AFP. "These elections are very necessary. It will be the top priority for the new government."
Local elections had been due to take place last July but were first postponed until October, then deferred indefinitely.
The last time the Palestinians went to the polls was for parliamentary elections in 2006, which Hamas won by a landslide.
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New ministers took over several key portfolios including that of the finance and justice ministries, an official list of the line-up showed.
After the cabinet resigned en masse last year, the Palestinian leadership said it would hold legislative and presidential elections "in the coming months," with Abbas tasking Fayyad to form a new government.
But the process was put on ice after the surprise announcement in April 2011 of a reconciliation deal between Abbas's Fatah movement and its Islamist rival, Hamas.
The agreement called for the creation of an interim cabinet of independents selected by the two factions, which would prepare for elections that were rescheduled to happen by May 2012.
The deal has largely stalled, and Abbas said on Wednesday that the impasse had left his administration paralysed, spurring him to call for the formation of a new cabinet.
But the Hamas government in Gaza slammed the decision to form a new cabinet, accusing Abbas's Palestinian Authority and the Fatah movement he heads of abandoning reconciliation.
"This strengthens the division," Hamas spokesman Fawzi Barhum told AFP, saying it "shows clearly that the Palestinian Authority and Fatah are far from implementing" the unity agreement.
In a bid to explain the decision, Abbas said he was "forced" to announce a new government after his Ramallah-based administration found itself unable to function.
And he also left the door open to an 11th-hour agreement with Hamas.
"If we reach an agreement with Hamas tomorrow or any time after that, this government will no longer have a role," he said.
"But I can't wait forever. A number of ministers have resigned from the current government, and now the administrative situation is paralysed."
Earlier on Wednesday, Abbas also moved to change the election law, which had until now stipulated that local elections must be held simultaneously across all of the Palestinian territories, local development minister Khaled Qawasme told AFP.
The amendment means that local elections can now be held separately in the West Bank and Gaza and do not have to take place on the same day, freeing up the Ramallah administration to begin planning a long-overdue vote, he said.
"Today president Abbas changed the local election law and gave the government the right to call elections in stages," Qawasme told AFP. "These elections are very necessary. It will be the top priority for the new government."
Local elections had been due to take place last July but were first postponed until October, then deferred indefinitely.
The last time the Palestinians went to the polls was for parliamentary elections in 2006, which Hamas won by a landslide.
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