63-year-old Sharif was sworn in by President Asif Ali Zardari at a function at the presidency this evening after being formally elected as Prime Minister by an overwhelming majority in Pakistan's 342-member National Assembly.
Sharif is the 27th Prime Minister of Pakistan, which has witnessed three military coups in its 66-year history. He became the first person to serve as Prime Minister for a third term.
Sharif, served as premier during 1990-1993 and 1997-1999 but was ousted from office before he could complete his term once on corruption charges and later because of a military coup led by Pervez Musharraf.
After spending the past five years in the opposition, Sharif led his PML-N party to victory in the May 11 general elections.
"The economic position is very bad and I will not present a fanciful image of heaven," Sharif said while addressing the National Assembly after his formal election as the premier.
He pledged that he would not "sit easy" or allow his "team to sit easy". Foreign policy issues, including relations with India, did not figure in Sharif's speech though he said that US drone strikes in Pakistan's tribal belt "must stop".
Sharif was formally elected Prime Minister by the National Assembly after bagging 244 votes in the House.
Makhdoom Amin Fahim, the candidate of the Pakistan Peoples Party that led the previous government, got 42 votes. Veteran politician Javed Hashmi, the candidate of Imran Khan's Pakistan Tehrik-e-Insaf party, got 31 votes.
The swearing in ceremony in an ornate hall in the presidency was attended by top leaders of the PML-N, several Pakistan Peoples Party leaders, including former premiers Yousuf Raza Gilani and Raja Pervez Ashraf, former ministers, parliamentarians, bureaucrats, and diplomats.
The President warmly shook hands with Sharif, clad in a dark sherwani, at the conclusion of the brief ceremony as the new premier's daughter, Maryam Nawaz, looked on with a smile.