Over a million people gathered in freezing temperatures at the capital's National Mall to witness Obama take the oath just after noon (17:00 GMT). The 47-year-old former senator for Illinois took the presidential oath, stumbling over his words only slightly, on a bible used at Abraham Lincoln's inauguration in 1861.
Joe Biden was sworn in as vice-president beforehand.
In his 20-minute inauguration speech, Obama stressed the difficulties of the tasks ahead of the U.S.
"Our nation is at war, against a far-reaching network of violence and hatred. Our economy is badly weakened," he said.
However, he also expressed belief that Americans could rise to these challenges.
"The challenges we face are real. They are serious and they are many. They will not be met easily or in a short span of time. But know this, America: they will be met," he said.
Obama also said that the U.S. was "Ready to lead once more."
