HM the King endorsed Surayud who was nominated by the military council that deposed Prime Minister Thaksin Shinawatra when he was in the US.
Surayud, dressed in a white military uniform prostrated himself in front of a wall-sized portrait of the king as a sign of respect. He stood alongside the six coup leaders at Government House in the Thai capital during the swearing in ceremony.
Surayud's appointment came after HM the King endorsed the interim charter that will replace the 1997 charter abolished on September 19 when the military council, led by Army Commander in Chief Gen Sonthi Bunyaratblin, seized the power from Thaksin Shinawatra last month.
Sonthi earlier sought reassure the country the military would not interfere in the work of the new prime minister.
The new interim constitution tasks the junta with choosing a new prime minister who will then be responsible for selecting his cabinet.
Gen Sonthi told reporters on Sunday he had asked former Thai army chief General Surayud Chulanont to become prime minister.
"We will not interfere in selection of ministers," he said.
"The new prime minister will use his own judgement. The cabinet ministers will be more knowledgeable than us" about running state affairs, he said.
But Sonthi reaffirmed that the Council for National Security, as the junta are now calling themselves, will help run the country during any transition period.
"As the new prime minister is forming his own government, we will administer the country," he said.