"I, Ellen Johnson Sirleaf, do solemnly swear to protect, defend and uphold the constitution of the Republic of Liberia and will conscientiously, faithfully and impartially discharge my duties to the best of my ability, so help me God," she said, her hand on the Bible.
The 67-year-old former economist was sworn in by the country's Supreme Court chief justice Henry Reed Cooper at a Monrovia ceremony attended by thousands of people from around the west African nation and several foreign leaders.
Ms Sirleaf won a second round election victory against football hero George Weah on November 8.
Mr Weah attended the inauguration ceremony amid the throng and has dropped claims of fraud at the polls "in the national interest."
Friendship and solidarity
In her first speech as head of state, the veteran politician said "my government extends a hand of friendship and solidarity to leaders of all political parties," urging them to bury their differences.
A quarter of a million people were killed in Liberia's wars, which played a destabilising role in neighbouring, diamond-rich Sierra Leone, now emerging from its own wars, and also spilled into conflict-divided Ivory Coast.
"Corruption, under my adminstration, will be the major public enemy. We will confront and we will fight it," Sirleaf told the thousands who had filed into the grounds of the parliament buildings.
Before she took the oath, the 64 members of parliament elected last October were sworn in with the 30 senators in the upper house during the ceremony at the Capitol, which began with fanfares from musicians with horns and drums.
Presidents Thabo Mbeki of South Africa, Abdoulaye Wade of Senegal, John Kufuor of Ghana, Laurent Gbagbo of Ivory Coast and Sierra Leone's Ahmad Tejan Kabbah attended.
So did Chinese Foreign Minister Li Zhaoxing, who is on a tour of west Africa, with US Secretary of State Condoleezza Rice and First Lady Laura Bush.
Freed slaves
As a nation, Liberia was founded in the 19th century by freed slaves backed by an American colonisation society.
Makeshift marquees made from bamboo sticks were festooned with balloons and ribbons in the national colours of blue, red and white, while the trunks of mango and avocado trees in the grounds were painted white.
Ms Sirleaf faces the mammoth task of rebuilding one of the world's most failed states, one ruined by civil wars that raged from the 1989 rebellion launched by Charles Taylor until 2003, when Taylor, by then the elected president, stepped down and went into exile as part of a UN-brokered peace process.
There are more than 15,000 United Nations peacekeeping troops stationed in the country and the UN mission stepped up security along main roads and at the airport serving Monrovia ahead of Monday's ceremony.
A US warship lay off the coast and key roads in the capital were closed to public vehicles.
Ms Sirleaf "ran on a platform of reconciliation and reconstruction and it's going to take the help of a lot of countries, including the United States, which has a special relationship with Liberia, for her and the people of Liberia to be able to do the reconstruction they need," she said.