Eleven others were also sworn in as Cabinet Ministers by Governor E S L Narasimhan, who administered them oath of office and secrecy at Raj Bhavan.
The Cabinet included Rao's son K T Rama Rao and nephew T Harish Rao.
Nine other Cabinet Ministers are Mohammed Mahmood Ali, T Rajaiah, Nayani Narasimha Reddy, Eatela Rajender, Pocharam Srinivasa Reddy, T Padma Rao, P Mahender Reddy, Jogu Ramanna and G Jagadish Reddy.
The party began on Sunday night itself as special teams from Mumbai lit up the skies in Hyderabad with a dazzling display of perfumed firecrackers. Midnight celebrations heralded the birth of the new state of Telangana on Sunday, ending the decades-old struggle for statehood.
The hour-long celebrations were held mainly at Tank Bund and Necklace Road, abutting the Hussain Sagar lake, which saw many agitations and student protests. Fireworks displays were also held at 50 other places across the twin cities of Hyderabad and Secunderabad.
As the clock struck midnight, Jaya jayahe Telanganga janani jaya ketanam, which will be the official song of Telangana state, was played on loudspeakers. The Golconda, Assembly complex, Gun Park, Tank Bund, Necklace Road and monuments in Hyderabad were all lit up.
Before KCR takes oath on Monday, the Governor of undivided Andhra Pradesh E S L Narasimhan took oath as the Governor of Telangana, and Presidents Rule revoked in the new state.
President's Rule imposed in united Andhra Pradesh was revoked partially to facilitate swearing in of a government in the newly-created Telangana headed by TRS chief K Chandrasekhar Rao.
However, the central rule will continue in the residual Andhra Pradesh till TDP chief N Chandrababu Naidu takes charge as Chief Minister a week later.
The TRS won 63 of the 119 seats in the newly-formed Telangana Assembly.
After the swearing-in ceremony, KCR is scheduled to attend the official Telangana Formation Day celebrations at Parade Grounds, Secunderabad, where he will meet all his party leaders. He is then scheduled to enter the Chief Ministers Office in Block C of the Telangana Secretariat at 12:57 pm he is superstitious about the number 6.
As one of his first official tasks, KCR is expected to sign files pertaining to the release of Rs 10 lakh each as ex-gratia to the families of all those died during the Telangana agitation. Files and orders appointing IAS officer Rajiv Sharma as Telanganas Chief Secretary and IPS officer Anurag Sharma as DGP will also be cleared.
In the afternoon, KCR is set to hold his first Cabinet meeting, where the issue of lifting police cases filed against students and employees who took part in the Telangana agitation is likely to be discussed.
Reaching out to various sections, KCR has invited Telangana Joint Action Committee members, student leaders who led the agitation, relatives of those who were killed during the protests, leaders of the movement, artists, industrialists, sportspersons and other prominent personalities for the swearing-in ceremony at Raj Bhawan. The list, however, does not include TDP leader N Chandrababu Naidu, who is set to take oath as Chief Minister of the residual Andhra Pradesh on June 8.
Among his party leaders, three other elected members of KCRs family will also be present at the swearing-in ceremony son K T Rama Rao elected as MLA from Sircilla, daughter K Kavita elected as MP from Nizamabad, and nephew T Harish Rao elected as MLA from Siddipet. Both his son and nephew are expected to get ministerial berths.
A day before taking charge, KCR was closeted with his senior party leaders and close aides on Sunday to select his Cabinet members. Expectations are high and it may prove to be a tricky affair for KCR. Many MLAs who won on TRS tickets were earlier with the Congress or Telugu Desam Party (TDP) and are expecting ministerial berths.
KCR, who had earlier promised to make a backward class leader the CM if TRS came to power but decided to take the leading role himself, is also under pressure to give proper representation to the BCs, as well as other classes.
Meanwhile, Presidents Rule will continue in the rest of Andhra Pradesh till June 8, when Naidu will take oath as the Chief Minister. As the Telangana administration is not in place yet, Prime Minister Narendra Modi is expected to be invited two weeks later for a special function to inaugurate the new state of Telangana. (With agency inputs)