JULY 1: Mr Lapid, head of a centrist party, will lead the country as it heads towards elections on 1 November.
It follows the collapse last week of the coalition which he formed with Mr Bennett. The upcoming elections will be Israel’s fifth in less than four years.
Mr Lapid faces a tough challenge from former PM Benjamin Netanyahu, who has vowed to return to power.
Although the new prime minister has previously said he is committed to a two-state solution to the conflict with the Palestinians, he is unlikely to begin any bold new initiatives as an interim leader.
Naftali Bennett handed over to Mr Lapid on Thursday in accordance with an existing agreement to rotate the premiership. Mr Bennett will occupy the post of alternate prime minister until the November election, which he has said he will not take part in.
Israel has seen a record-setting cycle of elections since April 2019 as parties time and again failed to secure enough seats to form a governing coalition with a majority. The Lapid-Bennett coalition temporarily broke the stalemate.
Mr Lapid, a 58-year-old former TV news anchor, ousted Benjamin Netanyahu, Israel’s longest serving leader, last June.
The outgoing government was the most diverse in Israel’s history, comprising eight parties from across the political spectrum – including those with ideologically opposing views. It also contained an independent Arab party for the first time since the state was established in 1948.
Despite Mr Bennett’s attempts to focus only on issues where parties could work together, it started to fray towards the end of its first year, becoming a minority government when a member of his right-wing Yamina party quit earlier this month.
In an emotional TV address last week, Mr Bennett said he and Mr Lapid had “turned over every single rock” to try to keep the coalition going, but that they had run out of options.
Mr Netanyahu welcomed the announcement as “great news for millions of Israeli citizens”.
Polls currently indicate that his party will take most seats in a new election but will still struggle to form a governing majority with its religious and nationalist allies.
The prospect of a further period of political uncertainty comes at a sensitive time, as Israel faces the challenges of rising living costs, an upsurge in violence in its conflict with the Palestinians, and renewed international efforts to revive a nuclear deal with Iran – something which alarms Israel.