In April 2017, 51 percent of Turkish voters endorsed constitutional changes backed by Erdogan, which scrapped the post of prime minister and allowed the president to appoint ministers and vice presidents and intervene in the legal system.
Hours after he was sworn in with sweeping new powers at a ceremony in the capital of Ankara late on Monday, Erdogan named Berat Albayrak as treasury and finance minister. "Turkey is leaving behind a system which cost the country politically, socially and economically".
The lira, which has lost almost a fifth of its value against the dollar this year, dropped almost 3 percent to 4.74 to the dollar minutes after the cabinet announcement.
Erdogan on Monday appointed former Chief of Staff Hulusi Akar as defence minister.
Meanwhile Mevlut Cavusoglu remains in his post as foreign minister.
"We are facing a period where we have to work hard to bring inflation down to single digits again", said Albayrak, adding that Turkey will have a stronger monetary policy in the upcoming period. Erdogan's supporters see the changes as a just reward for a leader who has put Islamic values at the core of public life, championed the pious working classes and overseen years of strong economic growth.
In his message, the King said that "this re-election is a testament to the renewed confidence of the Turkish people" in the president's efforts "to advance, develop and strengthen Turkey's position" internationally.
A former Istanbul mayor, Erdogan has been at the helm of Turkey since 2003 as prime minister and then the first directly elected president since 2014.
"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".
Russian Prime Minister Dmitry Medvedev was present, in a new sign of the warm ties between Ankara and Moscow, as was Venezuelan President Nicolas Maduro, regarded with disdain by Washington but an ally of Erdogan. No major Western leader featured on a list of 50 presidents, prime ministers and other high-ranking guests published by state news agency Anadolu.
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.
The lira, which has fallen precipitously this year, plunged more than 3% after the leadership decisions were announced on Monday.
But the pro-government daily Yeni Safak hailed it as an "historic day", saying: "One page is closing in Turkish history and a new page is opening".
The markets were keeping a close eye on the finance ministry, keen to see a steady hand at the helm in a fast-growing economy dogged by double-digit inflation and a widening current account deficit.
The moves have already stoked market fears that Erdogan will enact economic policies that will cause the ongoing currency crisis to spiral out of control.
Erdogan won an absolute majority in the presidential election with 52.5 percent of the vote.