President Sergio Mattarella was due to swear in Prime Minister Giuseppe Conte, a little-known law professor, and a cabinet that includes the two coalition party heads, the League's Mateo Salvini and Luigi Di Maio of the 5-Star Movement.
The coalition deal turns the page on months of political turmoil following an inconclusive election in March which had raised jitters among Italy's European partners.
Milan's stock market rose after a last-minute deal on Thursday averted the threat of an early election that could have turned into a referendum on whether Italy should ditch the euro.
Mr Conte has so far left policy specifics to the drivers of his improbable rise, his two deputies: Mr Salvini of the League and 5-Star leader Luigi Di Maio.
Paolo Savona, the eurosceptic economist who the populist coalition originally wanted for economy minister but rejected by Mattarella, is still part of the cabinet as European Affairs minister.
During the first attempt to put together a populist government, Salvini and Di Maio's decision to tap an unknown lawyer to be the next premier raised eyebrows in Italy.
Their ambitious economic proposals - which include a universal basic income for Italy's poorest, rolling back pension reform and a two tier flat tax - have anxious Brussels and financial markets given the country's sizeable debt. "That means more work, less corruption", he said.
Spain's new Prime Minister and Socialist party (PSOE) leader Pedro Sanchez poses for photographers in the chamber after a motion of no confidence vote at parliament in Madrid, Spain, June 1, 2018. Upon being named to the post, he said he would be "a lawyer for the [Italian] people", and said his team would work "to improve the quality of the lives of all Italians". The appointment also riled populists whose attempts to form a government were quashed by Mattarella over their designation of a euroskeptic economy minister.
"Employers and employees in Italy must not be enemies", he said, promising "I will not disappoint you".
The crucial Economy and Finance Ministry will be given to Giovanni Tria, professor of Political Economy at the University of Rome Tor Vergata, and president of Italy's National School of Public Administration.
Conte initially dropped his bid to secure cabinet after President Mattarella's blocked Conte's initial choice for economy minister, which cast doubt on the ability of the coalition to form a government.
The country had been without a government since it went to the polls in March, the longest such period in the country's postwar history.
But the Five Star Movement and the Lega Nord refused to abandon Mr Savona, failing to offer up a viable alternative for the role of finance chief.
But Cottarelli received no support from any of the major parties. While the head of state stalls, premier-designate Carlo Cottarelli, 63, a former International Monetary Fund executive, is being forced to wait.
However the new government will have to square its reforms with its debt pile which represents 132 percent of its gross domestic product, more than double the EU's 60-percent ceiling.