Villepin replaces the unpopular Jean-Pierre Raffarin who quit earlier on Tuesday. He is a former interior and foreign minister who angered the United States but won French hearts with his fierce opposition to the US-led war in Iraq.

He now has the task of reshaping government policy after voters showed their distaste for Raffarin's economic policies and high unemployment in Sunday's vote on the EU charter.

Chirac and Villepin, 51, did not immediately unveil the new government, which is expected to be announced on Wednesday. Some political commentators predict a slimmed-down cabinet.

The president was due to address the nation later on Tuesday and lay out policy for the new team, which will hope to govern France until presidential and parliamentary elections in 2007.

Villepin saw off a challenge from Nicolas Sarkozy, a Chirac rival for the presidency who leads the governing Union for a Popular Majority (UMP) party, who had all but demanded the prime minister's job for himself on Sunday.

French political commentators said there was persistent speculation that Sarkozy, 50, could return to the government as interior minister and Villepin's number two -- as well as remaining the leader of the UMP.

In a short statement, Raffarin defended his record over the past three years and said Sunday's defeat had not triggered his decision.

"I took this decision independently of the outcome of the referendum on the European constitution," he said.

Promotion of the loyal Villepin could be a sign Chirac intends to fight back after the referendum humiliation and keep open his options for seeking a third term in 2007.

A career diplomat, aristocrat and sometime poet, Villepin won applause at the United Nations and plaudits at home on the right and the left for opposing the US-led war in Iraq, but angered and frustrated Washington.

Washington and Paris have since been rebuilding ties.

Villepin's appointment is likely to go down well with European allies.