Viktor Yanukovich, humiliated in the 2004 "Orange Revolution", was set to cap a remarkable comeback after Ukraine President Viktor Yushchenko nominated him as prime minister to end four months of political deadlock.
Mr Yushchenko, who defeated Mr Yanukovich in the 2004 election, accepted he had run out of constitutional options in the early hours of yesterday and reluctantly turned to his rival after Mr Yanukovich signed a commitment to adopt pro-Western policies.
A vote in parliament to confirm Mr Yanukovich was delayed until today to allow more time to thrash out details of a "grand coalition" uniting the president's Our Ukraine Party with Mr Yanukovich's Regions group.
The two rivals have formally signed a declaration of principles for the new government. The president said the declaration, his condition for nominating Mr Yanukovich as prime minister, would safeguard the ideals of the "revolution".
Mass protests overturned Mr Yanukovich's election as president in 2004 and swept Mr Yushchenko to power in the ex-Soviet republic.
Now Mr Yanukovich, who served as prime minister from 2002 to 2004, will share power with the president and his allies are expected to dominate cabinet.
The Regions won most votes in March's parliamentary polls in which Mr Yushchenko's Our Ukraine party trailed a poor third, but no party won a clear majority.
Yulia Tymoshenko, who played a key role in defeating Mr Yanukovich two years ago, said the deal allowing him to lead the government was a betrayal.
"I call this document a political capitulation of the Orange camp," said Ms Tymoshenko, an estranged ally of the president who is now in opposition. "Ninety per cent of it is banalities... and empty statements."
The declaration included a commitment to continue Ukraine's drive towards Nato and EU membership and ensure the central bank and courts were independent from political interference.
"With this document, Ukraine's politicians are confirming that the current foreign and domestic policies are irreversible," Mr Yushchenko said.
The new cabinet will be dominated by Mr Yanukovich's supporters but with "some fairly key" ministerial posts for the Mr Yushchenko camp, said Yanukovich aide Taras Chornovil.
Mr Yanukovich favours closer ties with traditional ally Russia and his party has 186 seats in the 450-seat parliament. Our Ukraine has 86. The Communists and Socialists - Mr Yanukovich's allies - have 51 seats between them.
Ukraine's hryvnia currency strengthened to 5.02 to the dollar after traders saw an end in sight to the political uncertainty that followed the election. The hryvnia started the week at 5.06 to the dollar.
Mr Yushchenko's only alternative to naming Mr Yanukovich as prime minister had been to dissolve parliament, a move which would have plunged Ukraine deep into crisis.
Markets expect pragmatic economic policies under Mr Yanukovich. Mykola Azarov, a technocrat who oversaw economic and financial policy in his previous terms as prime minister, could return to government.
Mr Yanukovich has said he will lower taxes for business, including the big industrial exporters that drive Ukraine's economy. Powerful business "oligarchs" are among his supporters, prompting some opponents to accuse him of cronyism.
A party colleague said Mr Yanukovich's government would sign a new deal on natural gas imports that would cut out middleman Rosukrenergo. Critics say the firm's role in supplying gas from Turkmenistan to Ukraine lacked transparency.