PM Deuba will officially present his resignation to President Bhandari shortly.
KP Oli, as he is popularly known, succeeds the Nepali Congress Party's Sher Bahadur Deuba, who resigned almost two months after an alliance of communist parties swept the parliamentary and provincial elections.
An alliance of left parties - the CPN-UML and the CPM-Maoist Centre - has won a total of 116 seats.
The section 76's sub-section 1 of the Constitution of Nepal has the provision of electing the leader from the major party in the parliament to be nominated as Prime Minister and can form the government.
Deuba was sworn-in as Nepal's 40th prime minister on June 2017 under the alliance with CPN Maoist Centre, replacing Pushpa Kamal Dahal.
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His failure to include Maoist ministers during swearing-in ceremony raises question about the longevity of the new Government, especially at a time when the two communist parties are in the process of unification, political observers say.
Lal Babu Pandit was appointed the Minister for Population and Environment and Thammaya Thapa was appointed the Minister for Women, Children and Social Welfare.
Prachanda's Maoist Centre and UML are set to merge soon.
Election Commission had submitted the final results of the federal and provincial assembly elections to President Bidya Devi Bhandari on Wednesday.
In January, 16 ministers belonging to Nepal's CPN (MC) resigned from the cabinet following a decision by the ruling party. India supported the Madhesi and choked the supply of oil, medicine and other supplies to Nepal, resulting in severe shortages and making Oli's first turn as prime minister a hard one.
He had served as deputy prime minister during the interim government led by Girija Prasad Koirala in 2006 after the successful conclusion of the second Peoples Movement.