On Sunday, leaders of an autonomy movement met in the town of Ajdabiya to launch the government under the name of Barqa or Cyrenaica, according to supporters.
Over 20 ministers were shown in a pro-federalist television station taking the oath during the ceremony.
The self-rule announcement dealt a blow to the Tripoli government that has been trying to reopen eastern oil ports and fields blocked since summer by militias and tribes. They ask for a greater share of power and oil wealth.
The move is also expected to deteriorate relations between the east and Tripoli, which has dismissed the self-rule notion.
Local leaders in the east accuse the Libyan Prime Minister Ali Zeidan and some members of the General National Congress of corruption and failing to provide security since the fall of former dictator Muammar Gaddafi.
Crude production in Libya has reduced to some 10 percent of the country’s capacity of 1.25 million barrels a day due to protests and strikes at ports and oilfields.
Libya used to pump 1.4 million barrel per day until the strikes began.
Eastern Libya is also grappling with violence as a soldier was killed and another was injured when a mine exploded near an army checkpoint in the city of Benghazi late on Saturday.
In another incident, a bomb blast killed an intelligence officer and his daughter in the restive city.
Nearly 100 people gathered in the city center to protest against the killings, condemning the Libyan government and parliament for failing to provide security, according to activists.
Since the overthrow of Gaddafi in 2011, the Libyan government has been struggling to tackle the presence of armed militants, who fought against forces loyal to the former regime.