Prime Minister Albin Kurti and the largest opposition party agreed to back Justina Shiroka-Pula for president and limit the powers of the war crimes court.
Shiroka-Pula, 73, became a compromise candidate hours before the constitutional deadline. Parliament elected her president in a secret ballot. She is the third woman to hold the office and the first Catholic elected Kosovo's president.
I will work for unity, justice, development and stronger institutions, she told lawmakers, pledging to pursue a democratic and secure future for the country while maintaining its Euro-Atlantic orientation.
A candidate needs 80 votes in the first two rounds of parliament's vote and 61 in the third. If lawmakers fail to elect a president, parliament is dissolved and a new election must be held within 45 days.
The agreement also caps at 15 years the maximum prison term that the Kosovo Specialist Chambers in The Hague may impose. Convicted defendants will be allowed to serve sentences in Kosovo and seek a presidential pardon. In September, the court sentenced former president Hashim Thaci to 25 years in prison in a war crimes case. Three other former Kosovo Liberation Army commanders also received prison terms.