Former European Central Bank vice-president Lucas Papademos has been named as Greece's new prime minister, following days of negotiations.
Mr Papademos, 64, said he was taking over at a "critical point" for Greece.
Leaders of the three main parties making up a new government of national unity had been meeting the Greek president to try to reach a deal.
Greeks will hope the news provides the stability to get them through their debt crisis, correspondents say.
Mr Papademos, who is not a member of parliament, will head an interim government until elections can take place in February.
The govermment's main task will to ensure debt-laden Greece gets its latest bailout payment, by approving a new 130bn euro ($177bn; £111bn) international rescue package from eurozone partners and the International Monetary Fund.
"The president, after recommendations by political leaders who attended the meeting, has instructed Lucas Papademos to form a new government," the president's office said in a statement.
The new government will be sworn in at 12:00 GMT on Friday, a presidency official said.
In other developments:
- German Chancellor Angela Merkel denied reports that France and Germany were preparing for a scaled-down eurozone, insisting that the only goal was to stabilise the zone in its current form and make it more competitive
- Officials in the EU drastically cut the eurozone growth forecast from 1.8% to 0.5%, and said there was a risk of a new recession
- Amid ongoing concerns over Italy's crippling debt level and soaring interest rates, Italy raised 5bn euros from a new issue of bonds but at a one-year interest rate of 6.087%
Speaking after the announcement, Mr Papademos said his job "will not be easy but I am convinced the problems will be solved... in a quicker and more efficient way if there is unity and consensus".
He said the first priorities of the transitional government were to ratify the bailout agreed at an EU summit last month, and to implement the policies linked to it.
That will involve another round of austerity measures, which have already proved hugely unpopular with the Greek public.
Mr Papademos will replace Greece's outgoing Prime Minister George Papandreou, who was forced to step aside after a disastrous call for a referendum on the eurozone rescue package.
The referendum plan was dropped within a few days, but not before sparking the wider financial and political crisis which led to Mr Papandreou's forced withdrawal from the top job, even though he narrowly survived a confidence vote.
The new PM will also face a confidence vote in parliament, which is expected to happen on Monday, Greek state TV reported.
The Greek stock market jumped sharply when Mr Papademos arrived at the presidential palace to join the negotiations on Thursday morning.
Reports say Mr Papademos has accepted that the current Finance Minister, Evangelos Venizelos, remains in place.
The exact framework of the new coalition government is yet to be agreed.
In Italy, meanwhile, there was increasing speculation that former European Commissioner Mario Monti would take over from outgoing Prime Minister Silvio Berlusconi.
The markets appeared to calm amid hopes that the economist would take over the reins shortly, correspondents say, and borrowing levels fell back from the previous day's record highs.