Some analysts view bringing in Shtayyeh to replace outgoing prime minister Rami Hamdallah as part of Abbas's efforts to further isolate political rival Hamas, the Islamist movement that runs the Gaza Strip.
Shtayyeh, 61, is a long-term Abbas ally, while Hamdallah was politically independent.
The previous government was formed during a period of improved relations and had the backing of Hamas.
This government is instead expected to be dominated by Fatah, though other smaller parties will be represented. Hamas will not be included.
Hamas said the appointment reflected "Abbas's unilateralism and monopoly of power".
Shtayyeh has been part of a number of Palestinian negotiating teams in US-brokered talks with Israel, and is a former government minister.
He is also an academic and economics professor.
Hamdallah's government submitted its resignation in late January, though it has continued on an interim basis.
Abbas remains the primary decision-maker and interlocutor with the international community.
Palestinian politics has essentially been paralysed since 2007, when Islamist group Hamas seized control of the Gaza Strip from Abbas's forces in a near civil war, a year after winning parliamentary elections.
Since then Abbas's governments have maintained limited self-rule in the occupied West Bank, while Hamas has led a rival administration in Gaza.
Abbas has recently been in conflict with US President Donald Trump's administration, which is expected to release its long-awaited peace in the coming months.
Trump has since then taken a series of steps against the Palestinians, including cutting some USD 500 million in aid.
Palestinian leaders call it an attempt to blackmail them into accepting a plan that they believe will destroy their hopes for independent statehood.
Abbas won a four-year term as president in 2005, but he has since remained in office without further elections.
The 83-year-old who has had recent health issues has not publicly lined up a successor and the move to name Shtayyeh could put him among the potential candidates.
Others mentioned as possible successors include Al-Aloul, Palestine Liberation Organisation secretary-general Saeb Erekat, senior Fatah official Jibril Rajoub and head of Palestinian intelligence Majid Faraj.
Polls show the most popular Palestinian leader is Marwan Barghouti, but he is serving five life sentences in an Israeli jail for allegedly organising and authorising a series of killings of Israelis.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)