LONDON, March 29 (Reuters) - Humza Yousaf was sworn in as Scotland's new leader on Wednesday in a ceremony blending formal tradition with his Pakistani heritage, then announced his first cabinet in a move that risked deepening the divisions in his governing party.

Yousaf, the first Muslim to lead a democratic western European nation, was dressed in a black shalwar kameez at Scotland's highest court, the Court of Session in Edinburgh.

His wife, watching with his children and parents, shed tears at the start of the ceremony.

Yousaf, who pledged an oath of allegiance to King Charles, has previously said he wants to replace the monarchy with an elected head of state if he achieves his dream of ending Scotland's three-centuries-long political union with England.

The 37-year-old then announced his new cabinet of six women and three men, who were mainly close allies of Scotland's former leader Nicola Sturgeon, who resigned last month after dominating Scottish politics for more than a decade.

But the new lineup could breed disunity as it excluded Yousaf's leadership rivals or their allies who said they were offered only positions that amounted to demotions.

Shona Robison - a close friend of Sturgeon - will serve as finance minister as well as deputy first minister, while Angus Robertson will continue to have the responsibility for constitutional issues and external affairs.

Announcing his new team, Yousaf said his cabinet, which has a majority of women for the first time in Scotland's history, should look as much as possible like the voters they represent.

"As we make the case for Scottish independence, we will continue to govern well and demonstrate to the people of Scotland the benefits of decisions about their lives being taken here in Scotland," he said.

The new leader faces numerous challenges, including uniting his party, charting a new course towards independence from the United Kingdom, and fixing Scotland's problems with healthcare and education.

Yousaf narrowly won a leadership race on Monday after a bruising contest that followed the surprise resignation last month of Sturgeon, who had dominated Scottish politics for almost a decade.

The internal disagreements over the future of the pro-independence Scottish National Party and Scotland re-emerged after Yousaf's main rival, Kate Forbes, quit the government.

Forbes turned down an offer to become the minister for rural affairs and islands, a step down from her previous role as finance minister, according to a source familiar with the talks.

Former health secretary Alex Neil, who backed Forbes, said the proposed post was "an insult and not a real effort to unite" the party.

Yousaf had been expected to offer his leadership rival, whom he defeated by only about 2,000 votes, a more senior role.

During his leadership campaign, Yousaf had said he would depart from Sturgeon's "inner circle" style of leadership in favour of a "big tent" approach.

Forbes, who questioned Yousaf's record in government during the leadership campaign, posted on Twitter on Tuesday a reminder of the closeness of the contest, while saying Yousaf had her "full support".

The business minister, Ivan McKee, who backed Forbes in the leadership contest, also said he quit the government after being offered a job he considered a demotion.