Eveline Widmer-Schlumpf has announced she will accept her nomination to the cabinet, where she will replace controversial People's Party colleague Christoph Blocher.
The party immediately made good a pledge to pull out of the four-party government in protest at the exclusion of Blocher.
Widmer-Schlumpf announced her decision before a joint session of parliament on Thursday, and immediately took the oath of office.
"You have accorded me a great task with great responsibilities and I can only accept if I can count on your support," said the moderate People's Party member, adding that she had been very surprised by the turn of events.
Her acceptance of a place in cabinet threatens to increase political instability in the country.
The People's Party leader, Ueli Maurer, said after Wednesday's vote that she was free to make her own decision. However, he also stated that the party would go into opposition if Blocher was not re-elected.
The head of the People's Party parliamentary group, Caspar Baader, told the assembly on Thursday that Widmer-Schlumpf - and her party colleague in the cabinet, Samuel Schmid - would now be excluded from the group.
Blocher then made a short speech in which he said that although he was now out of the cabinet, he was still a force in politics.
"I feel a mixture of indignation and relief... indignation at the way in which I was not re-elected, as you didn't tell me the reasons... and relief because I can once again say what I think and talk about things that I couldn't owing to consensus and collegiality," said Blocher.
Long political career
Aged 51, Eveline Widmer-Schlumpf has had a long and successful career in cantonal politics.
She is known to be ambitious and a hard worker, and has a generally good reputation in political circles. She is also very popular in her home canton of Graubünden, in eastern Switzerland.
Her father, Leon Schlumpf, was a cabinet minister for the People's Party between 1979 and 1987 and served as Swiss president, a largely ceremonial post, in 1984.
Widmer-Schlumpf grew up near Chur and studied law at Zurich University, where she gained a doctorate.
She has been a member of Graubünden's government since 1998 and was the first woman to hold office.
A lawyer by profession, she is head of the cantonal finance department and president of the cantonal finance ministers' conference.
Widmer-Schlumpf is considered fast-thinking and an experienced speaker. These qualities have stood her in good stead when persuading colleagues – and political opponents – to vote for unpopular measures.
One of her greatest successes was convincing the Graubünden parliament to accept the largest package of budget cuts in the canton's history in 2003. She also helped lead Graubünden's finances out of the red.
At the national level, she played a leading role in successfully fighting a fiscal reform programme, which was then rejected in a popular vote.
Widmer-Schlumpf, who is married and has three children, is also vice-president of the board of directors of the Swiss National Bank.
swissinfo with agencies
The seven cabinet posts are currently divided up between the four largest political parties as follows:
Swiss People's Party 2
Social Democrats 2
Christian Democrats 1
Samuel Schmid (People's Party) 201 votes
Pascal Couchepin (Radicals) 205 votes
Hans-Rudolf Merz (Radicals) 213 votes
Moritz Leuenberger (Social Democrats) 157 votes
Micheline Calmy-Rey (Social Democrats) 153 votes
Doris Leuthard (Christian Democrats) 160 votes
New candidate Eveline Widmer-Schlumpf (People's Party) 125 votes