Htin Kyaw takes power from former general Thein Sein who has sponsored far-reaching reforms since 2011.
Suu Kyi, 70, is barred from becoming president by the junta-scripted constitution but has declared that she will steer the government anyway.
The handover at the junta-built parliament in the capital Naypyidaw marks the final act of a prolonged transition since Suu Kyi's National League for Democracy party swept the November elections.
The NLD won 80 percent of parliamentary seats, handing them a massive public mandate to rule after generations of army domination.
Wearing a collarless shirt in the NLD's peach-colored parliamentary colors, the bespectacled Htin Kyaw pledged to be "faithful to the people of the republic of the union of Myanmar".
"I will uphold and abide by the constitution and its laws. I will carry out my responsibilities uprightly and to the best of my ability," added the 69-year-old, who is an old school friend of the Nobel Laureate.
The cabinet was later sworn in by the speaker in a colorful line-up that included ministers from ethnic regions and a blue-clad Suu Kyi -- who holds a clutch of cabinet positions including that of foreign minister.
Yet three men in military uniform were also present at the swearing in -- a sign of the enduring stake the army holds inside the new government.
The military holds a quarter of all parliamentary seats, another gift of a constitution it scripted.
The Southeast Asian nation of 51 million people is in the throes of a dramatic transformation as it emerges from domination by paranoid and repressive generals who cut the country off from the outside world.
As a result expectations for an NLD dominated government run high, but Myanmar's new rulers face a steep task.
Civil wars continue to rage in ethnic minority borderlands, poverty is widespread and the military continues to hold huge political and economic powers.
"The country is ready and hungry for change," political analyst Khin Zaw Win told AFP, adding the NLD will be under pressure to quickly build on the reforms of the outgoing quasi-civilian government.
Myanmar has witnessed a staggering political change shepherded by outgoing President Thein Sein, a former senior junta general.