55-year-old Rudd was sworn in as the country's 28th Prime Minister by Governor-General Quentin Bryce at a short official ceremony at Government House in Canberra, returning back to his role that was taken away from him by Gillard in 2010.
In his first address today in Parliament, he called on MPs to be a "little kinder and gentler" with each other.
"Let us all remember particularly on days like this that in this Parliament, and in this place, we are all human beings, we all have families and we all have emotions, so let us try - just try - to be a little kinder and gentler with each other in the further deliberations of this Parliament," he said apparently referring to bickering within his party that led to his showdown with 51-year-old Gillard, the nation's first woman Prime Minister.
Rudd is considered more popular than Gillard, and while the conservative opposition is still expected to win the next election, his leadership may save Labor from a crushing defeat.
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But he also paid tribute to Gillard, who he defeated in a caucus ballot yesterday by 57 votes to 45.
"Through the difficult years of minority Government the former Prime Minister has achieved major reforms for our nation that will shape our country's future," Rudd said.
"On top of all that, I acknowledge her great work as a standard bearer for women in our country; Australia's first deputy Prime Minister, Australia's first woman as Prime Minister," he said.