Mr Zahawi, 55, inherits an economy that is heading for a sharp slowdown or even a recession, and will face immediate pressure to do more to help struggling taxpayers.
He was previously education secretary and was replaced in the portfolio by Michelle Donelan, who was a junior education minister.
After working in junior ministerial roles in the education and business departments, Mr Zahawi was appointed minister in charge of the Covid-19 vaccine rollouts in 2020.
In 2021, Mr Johnson promoted him to the Cabinet to run education policy.
Born in Iraq to a Kurdish family, Mr Zahawi came to the UK at the age of 9, when his parents fled the regime of Saddam Hussein.
Growing up in London, he has described the difficulty he had adapting to life in the UK, especially his struggles with the English language and bullies at school.
The young Nadhim spent much of his time playing football, studying maths and science, and horse riding.
It was not until he began studying chemical engineering at University College London that he developed an interest in politics and became actively involved with the Conservative party.
“They just looked reasonable and actually they were very pleasant and talked about things like opportunity and freedom – stuff that resonated with me,” he says of his fellow conservative students.
“I just thought, ‘those are my values’."
He has often said his own past deeply influenced his view of Britain and he recently spoke of the debt he owed poet Philip Larkin as he improved his English as a teenager.
Believed to be one of the richest politicians in the House of Commons, he helped to found polling company YouGov after his studies.
Regarded as a “safe pair of hands”, Mr Zahawi inherited the education portfolio after the sacking of Gavin Williamson, who became deeply unpopular with the public over the exams fiasco during the Covid-19 pandemic.
His tenure in the role has not been without difficulty and in recent weeks he had been trying to avert strike action by teachers, which he called “unforgivable” months after children returned to school after the disruption of the pandemic.
Mr Zahawi became a junior education minister under Theresa May, but his loyalty to Mr Johnson has never seriously wavered.
Labour’s Rachel Reeves, who the new chancellor will face at the dispatch box, said that the country needed leaders who acted in the public interest.
“It’s clear that the Prime Minister and Chancellor are only acting in theirs,” Ms Reeves said.
Mr Zahawi has been an MP for Stratford-on-Avon since 2010.