Social Democrat Scholz, who formed a coalition with the ecologist Greens and the liberal Free Democrats, has promised to boost green investment and strengthen European unity.
Chancellor Olaf Scholz has pledged a "new beginning" for Germany as he took over from Angela Merkel in an official power handover ceremony.
Social Democrat Scholz was sworn in as chancellor on Wednesday, taking the oath of office in front of lawmakers at the historic Reichstag building in the heart of the German capital Berlin.
"It will be a new beginning for our country. In any case I will do everything to work towards that," said the 63-year-old.
In a short speech, he hailed Merkel as a great chancellor and thanked her for a close and trustful relationship over the past years.
Merkel wished Scholz a "steady hand" as the country faces a brutal fourth wave of coronavirus infections and challenges to its democratic order from authoritarian leaders.
Shortly after the ceremony, President Frank-Walter Steinmeier formally appointed the country's new cabinet.
The German parliament elected Scholz as chancellor, turning the page on 16 years with Merkel at the helm of Europe's top economy.
Scholz, who won 395 of the 707 votes cast in the Bundestag lower house, has pledged broad "continuity" with the popular Merkel.
The former finance minister led his Social Democrats to victory in the September 26 election – an outcome considered unthinkable at the start of the year given the party's then festering divisions.
Scholz has now cobbled together Germany's first national "traffic light" coalition with the ecologist Greens and the liberal Free Democrats, nicknamed after the parties' colours.
Their four-year pact sealed late last month is called "Dare for More Progress", a hat tip to Social Democratic chancellor Willy Brandt's 1969 historic pledge to "Dare for More Democracy".
The alliance aims to slash carbon emissions, overhaul decrepit digital infrastructure, modernise citizenship laws, lift the minimum wage and have Germany join a handful of countries worldwide in legalising marijuana.