In a unanimous vote, Ethiopian lawmakers picked career diplomat Sahle-Work Zewde, 68, to replace Mulatu Teshome who resigned in unclear circumstances.
Ethiopia's reformist Prime Minister Abiy Ahmed last week appointed a slimline 20-person cabinet in which half the posts are held by women.
They include defence minister Aisha Mohammed and Muferiat Kamil who leads the newly created Ministry of Peace, responsible for police and domestic intelligence agencies.
"If the current change in Ethiopia is headed equally by both men and women, it can sustain its momentum and realise a prosperous Ethiopia free of religious, ethnic and gender discrimination," Sahle-Work said Thursday.
Sahle-Work, who was born in the capital Addis Ababa and attended university in France, has been Ethiopia's ambassador to France, Djibouti, Senegal and the regional bloc, the Intergovernmental Authority on Development (IGAD).
Just prior to her appointment as president she was the UN's top official at the African Union. She is fluent in English and French as well as Amharic, Ethiopia's main language.
As president she is expected to serve two six-year terms.
Symbolism and influence
"Mulatu has shown us the way for change and hope, he has shown life continues before and after leaving power. I call on others to heed his example and be ready for change," said Sahle-Work in a speech to parliament.
Political power in Ethiopia is wielded by the prime minister with the president's role restricted to attending ceremonies and functions.
Nevertheless, Sahle-Work's position carries important symbolic weight and social influence.
"Government and opposition parties have to understand we are living in a common house and focus on things that unite us, not what divides us, to create a country and generation that will make all of us proud," she said.
"The absence of peace victimises firstly women, so during my tenure I will emphasise women's roles in ensuring peace and the dividends of peace for women."
Sahle-Work becomes Africa's only serving female head of state, albeit in a ceremonial role.
A handful of African countries have in the recent past been led by female presidents with executive powers, including Ellen Johnson Sirleaf in Liberia (2006-18) and Joyce Banda in Malawi (2012-14).
Banda was elevated to the presidency following the death in office of Bingu wa Mutharika, while Sirleaf won two elections before standing down earlier this year at the end of her constitutionally mandated terms.