The mild-mannered moderate took the oath of office for a five-year term at a ceremony in Port Au Prince attended by foreign dignitaries and members of Haiti's newly elected parliament.
The mood was largely festive in the capital, although shots rang out at a Port-au-Prince prison about two hours before the inauguration ceremony in what police said was an escape attempt by a dozen prisoners.
Mr Preval took the oath of office while placing one hand on the Haitian constitution.
"I pledge allegiance to the Constitution, to respect and ensure respect for the laws of Haiti and to protect the sovereignty of the nation," he said in his native Creole.
Among the prominent foreign guests were Florida governor Jeb Bush, the younger brother of US President George W Bush, French Foreign Minister Philippe Douste-Blazy and Canada's governor-general Michaelle Jean, who was born in Haiti.
Celebrations
Thousands of Haitians celebrated Preval's inauguration outside the parliament building where the ceremony took place.
Haitians decorated their homes with flowers, wore T-shirts with pictures of Mr Preval and Mr Aristide, as they danced and sang throughout the capital. Some even chanted: "Whether you want it or not, Aristide will come back."
"Finally I got what I wanted," said Evelyne Dessours, a Preval supporter. "I wish him well in his work, hoping that he will give me work too."
After his swearing-in, the new leader made a brief speech at the presidential palace before a crowd of thousands.
"Haitians, the solution to the country's problems is in our hands," the new president said. "We must make peace through constant dialogue. ... If we make peace, we will be able to open the door to investments, employment, the development of tourism and education."
Mr Preval said the 8,900-strong UN mission deployed here after Mr Aristide's departure was "not over yet" and that it should stay to help train Haitian police.
Security was tight with about 4,500 members of the Haitian police on the streets, backed up by UN peacekeepers.
Security perimeters were set up around parliament, at a religious ceremony at a cathedral which Mr Preval attended and at the presidential palace.
Formidable challenge
A one-time ally of Mr Aristide, Mr Preval has distanced himself from the former president.
Facing an armed rebellion and a loss of international support, Mr Aristide resigned under pressure two years ago. He currently lives in exile in South Africa.
Mr Preval, who was elected president on February 7 with 51 percent of the vote, enjoys wide support among the poor in this nation of eight million. He served as prime minister under Mr Aristide and as president from 1996 to 2001.
Mr Preval faces a formidable challenge in keeping together the deeply divided country that relies on foreign aid for survival. France's Douste-Blazy said his country would boost its aid to Haiti.
Lacking a parliamentary majority, one of his first tasks will be to negotiate with rivals before naming a new prime minister and forming a government.