"The time has come to renew the founding values of our beautiful Ivory Coast, and to reunite Ivorians," he said at a ceremony attended by UN Secretary General Ban Ki-moon, President Nicolas Sarkozy of former colonial power France and African leaders.
"Let us celebrate peace, without which there can be no development," said Ouattara, 69.
"This day is an historic moment for us," said Ouattara, hailing what he called "the victory of democracy".
Ouattara also promised parliamentary elections before the end of the year.
Thousands of his supporters sang and danced at the ceremony, at the Felix Houphouet-Boigny Foundation, named for the country's founding president.
Ouattara took the oath of office on May 6, nearly a month after his bitter political rival Laurent Gbagbo was captured after having refused to cede power following the November presidential election.
A months-long conflict had pitted Ouattara against Gbagbo, who refused to leave office after his rival was declared the winner of November's presidential poll.
Nearly 3,000 people died in the violence that followed the vote, according to the new government, and tens of thousands fled into neighbouring countries.
Gbagbo was captured in an underground bunker in Abidjan on April 11 by forces loyal to Ouattara, backed by France and the United Nations.
Saturday's event was closely guarded by members of Ouattara's Republican Forces and UN peacekeepers.
African Union and UN Security Council envoys, meeting in Addis Ababa, applauded Ouattara's inauguration in a joint statement.
Ouattara praises France
Ouattara, in his speech, praised France, "with whom the Ivory Coast shares historic ties and a common vision of the future," he said.
"Mister President Sarkozy, the Ivorian people thank you," Ouattara said to loud applause, also thanking the United Nations.
Sarkozy, the only Western head of state present, offered full support for his "friend" Ouattara.
"It's important to be in Ivory Coast at the side of Alassane Ouattara, for democracy, for Africa," he told reporters on his arrival
Hours later, Sarkozy visited a French military base in the southern suburbs of Abidjan where he told an expatriate audience that France "will always keep military forces here to ensure the protection of our citizens".
Any French troop presence in Ivory Coast would involve an "agreement" with the country's authorities, he added, and the French army would not be "there to ensure the stability of any government".
He also said he "wanted" to believe the two French citizens kidnapped in Abdijan were still alive.
No effort would be spared in the search for Stephane Frantz di Rippelm and Yves Lambelin, taken from a Abidjan hotel on April 4, he pledged.
Slow return to normalcy
Since Ouattara took power after Gbagbo's arrest, Ivory Coast has begun a slow return to normalcy: public servants recently went back to work, schools have reopened, and economic activity has slowly resumed.
But the west African country is still marred by acts of violence and pillaging, and many citizens have still to return to the homes they fled during the unrest.
The security situation is notably fragile in the west, where pro-Gbagbo Liberian mercenaries are accused of having killed more than 200 people at the beginning of May.
Police and military police have been slow to resume work in Abidjan, which remains under control of the Republican Forces.
Ouattara has promised that no crimes committed since November 28 will go unpunished, no matter who committed them. He has asked The Hague-based International Criminal Court to investigate the most serious violations.
Demonstration in Paris
But around 1,000 people demonstrated in Paris Saturday in support the former president Gbagbo, who is currently under house arrest in Ivory Coast and being investigated over the post-election violence.
"We denounce the character of this inauguration, which for us is a sham," Zap Krasso, a leader of the demonstration, told AFP.
"We do not recognise this inauguration and we want to state our support for Laurent Gbagbo, who we still consider our president."
