Palestinian President Mahmoud Abbas has sworn in a new emergency government that excludes his Islamist rivals, Hamas, who have seized control of Gaza.
Prime Minister Salam Fayyad is seen as a reformer
Mr Abbas also issued decrees enabling new Prime Minister Salam Fayyad to rule without parliamentary approval and outlawing all of Hamas's armed forces.
Mr Fayyad's predecessor, Ismail Haniya, has said the new government is illegal.
Israel's government said a non-Hamas administration would create a fresh opportunity for a partnership in peace.
The US has also said there will be no obstacles to re-engaging with the new Palestinian government.
But Israeli officials have called for steps to isolate Gaza, which they say will be considered a "terrorist entity".
Israel fuel company Dor Alon cut off all fuel supplies to the Strip except those to the electricity generating plant, in a move which it said had been co-ordinated with the Israeli military.
Reports say the move could lead to severe shortages of petrol and cooking gas within days, unless it is reversed.
Gaza's 1.3 million residents are already facing shortages of food and other essential supplies, although Israel says it has no objection to letting through humanitarian aid.
Meanwhile, Israeli Deputy Defence Minister Ephraim Sneh was quoted by Israeli radio as saying that Israeli troops had been positioned in northern Gaza near the border.
The new government took the oath of office before Mr Abbas, the leader of Fatah, in the presidential compound in the West Bank city of Ramallah.
Born in 1952 near West Bank city of Tulkarm
Holds a PhD in economics from the University of Texas
Worked at the World Bank in Washington from 1987-1995
IMF representative to Palestine until 2001
Finance minister under the Fatah-controlled administration from 2002-2005
Credited with cracking down on official corruption
The cabinet is said to be dominated by independents, with only Interior Minister Abdel Razak Yehiyeh a member of Fatah.
Mr Fayyad, who served as finance minister in the previous administration, pledged to protect the interests of the Palestinian people.
"I swear by God that I will be faithful to the homeland and its sanctities, to the people and its national heritage, to respect the constitution and the law, and to fully protect the interests of the Palestinian people," he said.
He added that his cabinet would work to "put an end to the anomaly of the dishonourable events", referring to Hamas taking control of Gaza.
A decree signed by Mr Abbas allowed him to swear in the new cabinet and gave it the power to make decisions without the approval of parliament, in which Hamas has a majority.
A second decree outlawed a Hamas paramilitary force, the Executive Force, and other "militias" linked to the group.
But the BBC's Bethany Bell in Jerusalem says that Mr Abbas may not have the power to enforce the ban on Hamas's armed forces.
Hamas, meanwhile, dismissed the new government as illegal.
"This government is not national because it ignored the Palestinian national consensus," said spokesman Sami Abu Zuhri.
"Not only was the current national unity government established by law but also through national consensus and the accord between Hamas and Fatah.
"This government is similarly illegal, because the Palestinian basic law simply does not contain the words 'national government'."
Mr Abbas sacked Mr Haniya, a Hamas leader, on Thursday after factional fighting left more than 100 people dead in Gaza.
Shortly afterwards, the Hamas movement said it had taken over full control of the territory, as its gunmen ransacked Fatah offices and arrested or killed its fighters.