Knesset - the Israeli parliament - approved the new government led by Prime Minister Benjamin Netanyahu with a majority of 68 votes in favour and 48 against. Netanyahu and his 21 ministers then took their oaths of office before the house.
The new government came after over 40 days of tortuous coalition negotiations and just two days before a landmark visit by Obama.
Netanyahu addressed the Knesset after Likud Minister Yuli Edelstein was voted in as the new Knesset speaker, replacing Reuven Rivlin.
"As prime minister, I don't have the privilege to abandon the external challenges to Israel. We must ensure the existence of the State of Israel. Therefore, the first priority will be the defense of the country and its citizens," Netanyahu said.
He noted Iran continuing to get closer to crossing the "red line" towards a nuclear weapon, and the threat of some of the "most dangerous weapons in the world" being transferred into the hands of terrorists in a deteriorating Syria as the main threats to Israel.
The 63-year-old prime minister said the new government would be ready to make "a historic compromise" for the sake of a peace agreement with the Palestinians, but added the Palestinian leadership would have to be willing to compromise as well.
With no dearth of hawks in his own party's slate, the inclusion of 12 Bayit Yehudi (Jewish Home) parliament members has virtually sealed the possibility of any movement in talks with the Palestinians.