Ahmadinejad took the oath and pledged to protect the constitution and frontiers of Iran but his inauguration speech was unusually soft-toned for the bellicose Iranian leader. He focused on foreign policy, saying he would make it "stronger and with more effective new plans."
"I hereby swear by the almighty God to protect the system of the Islamic Revolution and the constitution, I will spare no effort to safeguard the frontiers of Iran" Ahmadinejad said.
He urged unity and said: "We should join hands as we move forward to fulfill our goals."
Ahmadinejad did not directly address the massive street demonstrations against his proclaimed election victory, but said his government would "resist any violation of law and interference."
"We will not remain silent, we will not tolerate disrespect, interference and insults," he said.
Top officials and clerics attended the ceremony, which was boycotted by opposition leaders and moderate lawmakers.
Iran's opposition has claimed Ahmadinejad stole the vote in the June 12 presidential elections and there have been mass street protests that have shaken the country's religious leadership. At least 30 demonstrators have been killed in the uprising.
Opposition groups called protesters again to the streets Wednesday to coincide with the inauguration. Unconfirmed reports on social networking Web sites said large numbers of protesters gathered in downtown Tehran were met wtih tear gas from Iranian security forces. Several videos were posted on YouTube, but none showed serious clashes or more than a handful of protesters amid a heavy security presence.
Hundreds of policemen were deployed around the parliament, while a subway station nearby was closed to the public.
"Mr. Ahmadinejad will have to preside over a divided and unhappy country," predicted Haleh Esfandiari, the distinguished Director of the Woodrow Wilson Center's Middle East Program.
Esfandiari, who was arrested in 2007 and spent three months in the regime's most notorious prison, CBS News correspondent Elizabeth Palmer she feared Iran's president would "continue to intimidate people, and have show trials. This could go on for the duration of Ahmadinejad's presidency. Iran will be ruled by force."
Palmer reports that, while Esfandari's predictions may sound dire, they also show that Iran's opposition movement is unlikely to simply dissipate with Ahmadinejad's official reclamation of office.
Watch Esfandari speaking to CBS News:
The inauguration followed an official endorsement of Ahmadinejad's presidency on Monday from Iran's Islamic religious establishment and the country's Supreme Leader Ayatollah Ali Khamenei. Under the constitution, Ahmadinejad has two weeks to propose a government and offer a list of Cabinet members for approval in parliament.
Ahmadinejad also pledged to "uproot all sources of corruption" and move the economy forward, saying he believes he can "solve the problem of unemployment."
He made only a vague reference to the West and the U.S., which Ahmadinejad's camp has accused of backing the street protests.
"Some countries have not recognized the elections or extended their congratulations. They do not respect the rights of other nations, yet they recognize themselves as the yardstick for democracy," said Ahmadinejad.
"Nobody in Iran is waiting for anyone's congratulations," Ahmadinejad added, to cheers from lawmakers.
Before Ahmadinejad's speech, the head of Iran's judiciary, Ayatollah Mahmoud Hashemi Shahroudi, urged Ahmadinejad "to not use force ... on minor issues."
Several foreign ambassadors, veterans from the Iran-Iraq 1980s war and religious leaders attended the inauguration.