Iceland's coalition government named agriculture minister Sigurdur Ingi Johannssonn as the new prime minister.
The right wing coalition said Johannssonn will lead the government until elections are held in the autumn.
The coalition, consisting of the Progressive Party and the Independence Party, refused to heed popular demand that the whole government should resign in the wake of the Panama papers revelations.
Johannssonn replaces Sigmundur David Gunnlaugsson, who resigned as pressure mounted on him following revelation that he and his wife had hidden offshore financial dealings.
Outgoing prime minister Gunnlaugsson will continue as the head of the Progressive Party.
"We expect to have elections this autumn. We will continue our work together. We are of course hoping this will help bring stability in the political system," Johanssonn told, according to the Agence France-Presse.
Johanssonn added that the coalition will continue to run the country's affairs despite thousands of protesters calling for the whole government's resignation.
The Panama Papers -- a heap of 11.5 million documents that detail how Panamanian law firm Mossack Fonseca helped the rich and powerful avoid tax and launder money -- showed the prime minister owned with his wife an offshore company.
Apart from Gunnlaugson, a string of world leaders including UK Prime Minister David Cameron, Pakistani Prime Minister Nawaz Sharif, Russian President Vladimir Putin, Egypt's former President Hosni Mubarak, former Libyan leader Muammar Gaddafi, Syria's President Bashar al-Assad, Chinese leader Xi Jinping and Li Peng and Malaysian Prime Minister Najb Razak are among those implicated directly or through relatives.