Gyude Bryant, a relatively unknown businessman, has been sworn in as the head of a new power-sharing government.
Mr Bryant's arrival in Monrovia was marked by a prayer service
Mr Bryant took the oath on the Bible at a ceremony attended by several West African leaders, heavily guarded rebels and officials of the former government.
He was chosen for the post by the opposing factions at peace talks which ended the country's 14-year civil war.
The BBC's Paul Welsh in the capital, Monrovia, says there is a festive atmosphere in the city, just two months after it was the scene of heavy fighting.
However, United Nations peacekeepers are on high alert and security is tight after a shootout between rebels and government supporters in Monrovia two weeks ago.
In a reminder of the devastation wrought by the fighting, the guests were sitting on plastic chairs because the parliament building had recently been looted.
And the sombre ceremony was punctuated by the sound of these chairs breaking and people falling to the floor.
"If there's no peace in Liberia, there's no peace in West Africa," said President Olusegun Obasanjo of Nigeria, which has contributed the bulk of the peacekeeping force in Liberia.
The leaders of the two rebel groups did not attend the ceremony but both factions were represented by the ministers they have nominated to be part of the new government.
Our correspondent says the new government faces big challenges.
About 45,000 fighters, half of them children, must still be disarmed.
And Mr Bryant also has the tough job of persuading former enemies to work together to rebuild Liberia.
Liberia's former President Charles Taylor, now in exile in Nigeria, pledged his support for the peace process on the eve of the swearing-in ceremony.
His wife, Jewel, travelled from Nigeria to attend the ceremony.
"It's a new chance to start a new page in the history of this nation," she told the AFP news agency.
Mr Bryant - a veteran campaigner against the warlords who have plagued his country - is expected to steer Liberia towards fresh elections in 2005.
Thousands died in three battles for the capital this year and almost half the population has been forced from their homes.
The Liberian civil war also had a destabilising effect on the surrounding region, affecting Sierra Leone, Guinea and Ivory Coast.
The BBC's Paul Welsh says that Mr Bryant, 54, was relatively unknown in his own country before his nomination this summer.
Starting out in life with an economics degree, he had a successful business career.
Liberia outside Monrovia remains highly unstable
He still heads the Liberia Machinery and Supply Company which he created in 1977.
In 1984, he helped found the Liberia Action Party (LAP) after the ruling junta lifted a ban on political activity.
Many credit the party with winning the 1985 presidential and legislative elections when the military leader, Samuel Kanyon Doe, declared himself the victor.
Mr Bryant was elected chairman of the LAP in 1992 and continued to wage a campaign of democratic opposition when Mr Taylor came to power.
Observers say his experience in negotiating will be crucial as he tries to manage a cabinet of 21 ministers, including former rebels and Taylor loyalists.