"You are taking on a great and beautiful but also difficult role with a lot of responsibilities," said President Heinz Fischer as he swore in Kern at Vienna's Hofburg palace.
The 50-year-old, renowned for his business achievements and snappy dress sense, replaces fellow Social Democrat Werner Faymann who threw in the towel on May 9 after a string of poor election results.
The new leader faces the major challenge of uniting a fractious SPOe party and smoothing over tensions with its coalition partner, the conservative People's Party (OeVP).
His appointment comes days before a presidential runoff vote on Sunday, pitting Norbert Hofer of the far-right Freedom Party (FPOe) against the Green-backed candidate Alexander van der Bellen.
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In the first round last month, Hofer comfortably beat his rival by 35 percent to 21 percent.
Meanwhile the SPOe and OeVP were knocked out of the race with just 11 percent of the vote. The dismal performance means that for the first time since 1945, Austria's president will not come from one of the two main parties.
Kern's biggest headache will be to decide whether to ditch the SPOe's 30-year-old taboo on cooperating with the far-right FPOe, dating back to when the late, controversial Joerg Haider became the party's leader.