The previous defence minister, Manohar Parrikar, stepped down on Sunday to become Chief Minister of Goa.
Election results on Saturday showed the ruling Bharatiya Janata Party (BJP) to be the second most popular party in the coastal state, but it will form the regional government after obtaining the support of smaller parties.
Modi's party claims victory in India's Uttar Pradesh and three other states
The BJP, with Prime Minister Narendra Modi at the helm, swept polls in the key northern state of Uttar Pradesh, as well as the Himalayan state of Uttarakhand.
Jaitley held the posts of finance and defence minister from May to November 2014. It was not immediately clear how long he would keep the two portfolios this time round.
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