On the flag the horse is galloping left instead of right and there is also an additional star, a bow and arrow representing Venezuela's indigenous people and a machete to represent the labor workers, among other changes.
Thousands of Chavez supporters and soldiers marched in a parade dedicated to the new flag as army helicopters and F-16 warplanes swooped overhead.
Floats, dancers and troops paraded past Mr Chavez, while his opponents held a small, boisterous march to protest the new flag.
Mr Chavez has been leading what he calls a "Bolivarian Revolution" to install socialism and help the poor.
As the symbol was hoisted he applauded and smiled as soldiers stood at attention at an outdoor ceremony marking the 200th anniversary of Venezuela's tri-colour flag.
"The white horse is now liberated, free, vigorous, trotting toward the left, representing the return of Bolivar and his dream," Mr Chavez said. "Long live the fatherland!"
Critics call the changes a waste of money. The new flag and coat of arms will eventually be adopted in the currency, passports and government documents.
When several Chavez supporters hung the new flag from light posts along the protest route, some opposition marchers pulled it down.
The two groups struggled over the flag, shouting, until police separated them. Opposition protesters held the old seven-starred flag, saying it will remain their national symbol.
Venezuela's solidly pro-Chavez National Assembly approved the new flag and coat of arms last week.
The horse on the coat of arms, which appears on the official flag's upper left corner, previously galloped right with its neck craning back the other way.
Mr Chavez has said the horse looked unnatural gazing backward, and historical drawings showed it was supposed to be running "freely to the left".
Many have suggested the horse's turnabout is simply a metaphor for Mr Chavez's politics.