The previous prime minister quit Tuesday as parliament was set ablaze.
“Congratulations! We wish you success, wish the country success,“ Paudel said to Karki after the small ceremony in the presidential palace, attended by diplomats and some former leaders.
The Himalayan nation of 30 million people was plunged into chaos this week after security forces tried to crush rallies by young anti-corruption protesters.
The military took back control of the streets on Wednesday, enforcing a curfew.
Thousands of young activists had used the online app Discord to debate the next steps -- and name Karki as their choice of next leader.
“It is a moment of victory... finally the power vacuum has ended,“ said Amrita Ban, a Gen Z protester.
“Honour the lives of those who sacrificed themselves for this moment”.
“We are hopeful that this would help in fostering peace and stability”, New Delhi’s foreign ministry said in a statement.
Protests fed into long-standing economic woes in Nepal, where a fifth of people aged 15-24 are unemployed, according to the World Bank, with GDP per capita standing at just $1,447.
Parliament, major government buildings and a Hilton Hotel were among the sites set ablaze by protesters on Tuesday.
More than 12,500 prisoners who escaped from jails across the country during the chaos “are still at large”, police spokesman Binod Ghimire told AFP.
Soldiers patrolled the largely quiet streets of the capital Kathmandu for a third day on Friday.
He was among many ordinary residents of Kathmandu who took advantage of a brief lifting of the curfew to stock up on supplies.
“We started this movement so we could make a better Nepal,“ he said - AFP
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