Erdogan appointed his son-in-law, Berat Albayrak, as the new minister of treasury and finance. He said it did away with a "system that heavily cost our country through political, social and economic chaos".
This year, in the elections held on June 24, Erdogan won an absolute majority in the presidential polls with 52.5 percent of the vote.
The process began in a contentious referendum a year ago when the executive presidency was voted in and last month's snap elections solidified Erdogan's power, which he won with 52.6 percent of the vote.
Its commentator Asli Aydintasbas wrote: "I don't think it would be an exaggeration to say that we entered a "second republic" era", after the republic set up by Turkey's secular founder Mustafa Kemal Ataturk. He also promised to take Turkey "much further" by solving the economy's structural problems.
After the election victory, Erdogan removed Mehmet Simsek, previous deputy prime minister and a former Merrill Lynch banker, as well as former Finance Minister Naci Agbal. Marc Pierini, a former European Union ambassador to Turkey and a visiting scholar at Carnegie Europe, said Erdogan's new powers would effectively make him a "super-executive president".
Mr Erdogan took oath of office to become the first Turkish President under the new presidential system of Government.
The decree, published in the Official Gazette, changes the wording in some 5,000 laws, removing references to the prime minister - whose office has been abolished - and transferring some powers to the president.
In what appeared to be the final emergency decree issued just one day before the inauguration, 18,632 public sector employees were ordered dismissed including thousands of soldiers and police officers.
The lira stood at 4.8270 to the dollar at 1553 GMT, weakening more than 2.5 percent from Tuesday's close of 4.7062.
Prominent market-friendly ministers, who encouraged investor confidence, are not included in Erdogan's new government.
"Most powers will be concentrated in his hands, there will no longer be a prime minister, and nearly none of the checks and balances of liberal democracies will be present".
After the inauguration, Erdogan will immediately turn to foreign policy, visiting northern Cyprus and Azerbaijan, both traditional first ports of call for a newly elected Turkish leader. The economy is experiencing high inflation, a declining currency and twin current account and budget deficits even as Erdogan insists on low interest rates.
The People's Alliance formed by the ruling Justice and Development Party and the Nationalist Movement Party has secured most seats in national parliament with 53.6% of the vote.
In the aftermath of the 2016 coup, Turkey, a member of the North Atlantic Treaty Organisation military alliance and still nominally a candidate to join the European Union, has detained some 160,000 people, jailed journalists and shut down dozens of media outlets.
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