Shah, who his signature black Nepali cloth cap and sunglasses at the ceremony on Friday, is Nepal's youngest prime minister in decades and the first Madhesi - people of the southern plains bordering India - to lead the Himalayan nation that is wedged between Asian giants India and China.
A former mayor of the capital, Kathmandu, Shah, 35, became prime minister after his three-year-old Rastriya Swatantra Party (RSP) won 182 seats in the 275-member parliament in the March 5 election, the first vote after the anti-corruption Gen Z protests in which 76 people were killed in September 2025.
In a new music video posted on his Facebook page on the eve of his swearing-in ceremony, Shah stressed patriotism and optimism for a bright future for Nepal.
"Nepal is not scared this time, the heart is full of red blood ... laughter and happiness will reach every household this time," Shah sang in the video featuring visuals of large crowds cheering him during his election campaign.
More than 200 Hindu priests and Buddhist lamas chanted hymns and peace prayers alongside the blowing of conch shells during the ceremony at the President House, attended by diplomats and senior government officials.
After being sworn in, Shah picked 14 members to his cabinet, keeping his campaign promise of having a small team to cut state expenses.
He named Swarnim Wagle, a Harvard-educated economist, as finance minister.
"The first test of the new government lies in transparent and prompt delivery of services to people, who expect early signs of good governance from Sunday itself," political analyst Puranjan Acharya said. Sunday is a working day in Nepal.
Acharya said Shah's early challenge was to implement the report of a panel that investigated the violence during the anti-corruption protests, a key demand of the families of the victims.
The report recommended the prosecution of those responsible for the crackdown, including then-prime minister KP Sharma Oli.
The youth-led protests were fuelled by a lack of jobs and endemic corruption in the country of 30 million people, where a fifth of the population lives in poverty and an estimated 1500 people leave the country daily for work abroad.
Political instability has been a bane, with 32 governments taking office since 1990 and none of them completing a five-year-term.
The Nepali Congress party, the country's oldest party, became a distant second group in parliament with just 38 seats.
The Communist Party of Nepal (Unified Marxist-Leninist) of Oli, who was forced to resign after the Gen Z unrest, controls 25 members.
Former chief justice Sushila Karki led the nation through the interim period through to the parliamentary election.
