The new government was named after discussions between new Prime Minister Manuel Valls and Mr Hollande which followed a crushing defeat for their Socialist Party in municipal voting last week.
Laurent Fabius and Jean-Yves Le Drian keep their positions as foreign affairs and defence ministers in the new government.
Former finance minister Pierre Moscovici has left the government and the brief has been split between two Socialists: Michel Sapin will take charge of finance and Arnaud Montebourg will be in charge of industry and economy.
Ms Royal was the Socialist candidate for president in 2007 but lost. She had four children with Mr Hollande in a relationship which lasted for more than 20 years.
Left-winger Mr Montebourg, who as industry ministry has long accused the EU of hurting economic growth with demands for lower public deficits, won new powers as economy minister in a cabinet reshuffle announced Wednesday.
His promotion will raise new concerns in EU capitals about France's resolve to stick to deficit targets, just two days after Mr Hollande hinted that Paris would seek further time from Brussels to get its public finances in shape.
The appointments were announced in a presidential statement read out on the steps of Mr Hollande's Elysee Palace.
But his Greens coalition partners refused to take part in Mr Valls's government in protest at his socially conservative stances on issues such as immigration, a move which could weaken support for economic reforms in parliament.
Mr Sapin will formally have oversight over France's public finances, which last year showed a deficit at 4.3% of output, well above an EU target of 3%. However, Mr Montebourg's expanded role, which will include oversight on industry and the digital economy, will give him a bigger say on policy than he had before.