Wearing a traditional African headdress, Sirleaf took the oath of office in a ceremony attended by thousands of Liberians and scores of foreign dignitaries, including first lady Laura Bush and Secretary of State Condoleezza Rice.
"We know that your vote was a vote for change, a vote for peace, security ... and we have heard you loudly," Sirleaf said in her inaugural speech.
"We recognize this change is not a change for change's sake, but a fundamental break with the past, therefore requiring that we take a bold and decisive steps to address the problems that have for decades stunted our progress," she said.
Standing in front of a one-starred Liberian flag with her left hand on a Bible, Sirleaf pledged to "faithfully, conscientiously and impartially discharge the duties and functions of the office of president of the Republic of Liberia to the best of my abilities, so help me God."
Sirleaf takes charge of a nation struggling for peace after a quarter century of coups and war and she has promised to unite it.
Speaking for the first time as president, she also pledged to stamp out corruption to secure the trust of skeptical foreign donors whose aid is desperately needed to rebuild.
In a statement, U.N. Secretary-General Kofi Annan congratulated Sirleaf, saying she had a "historic mandate to lead the nation toward a future of lasting peace and stability."
Security was tight at Monday's ceremony, with armed U.N. peacekeepers surveying the scene from atop surrounding buildings with binoculars.
The U.N. has redeployed 500 peacekeepers previously stationed outside the capital to strategic points in Monrovia and the international airport. Liberian police, though unarmed, have also increased their presence on the streets.
Two U.S. Navy warships also were visible offshore for the first time since the war ended in 2003, a rare show of support also meant to protect two high-profile guests: Mrs. Bush and Rice. Also attending were several African heads of state, including Nigeria's Olusegun Obasanjo and South Africa's Thabo Mbeki.
Sirleaf will serve a six-year term as head of Africa's oldest republic, founded by freed American slaves in 1847. The country has known little but war, however, since a rebel group led by Charles Taylor plunged the country into chaos, invading from neighboring Ivory Coast in 1989.
Taylor became president in 1997 but stepped down and was exiled to Nigeria as part of the 2003 peace deal brokered as rebels pressed on the capital. He is now wanted on war crimes charges by a U.N.-backed war crimes court in Sierra Leone for his role in backing a brutal rebel group during that country's 1991-2002 civil war.
On a flight to Monrovia, Rice told reporters Taylor "is through raping and pillaging this country, and the Liberian people are trying to look forward."
Nigeria has refused to hand Taylor over to the court and Sirleaf has said only that she would consult with regional leaders regarding Taylor's future. Rice said she's confident Sirleaf will work to hand Taylor over to the Sierra Leone court.
Rich in diamonds, iron ore and timber, Liberia was relatively prosperous and peaceful until a 1980 coup saw illiterate Master Sgt. Samuel Doe seize power and order Cabinet ministers tied to poles in their underwear and executed.
Harvard-educated Sirleaf was finance minister at the time, but was spared, she told The Associated Press in a recent interview, "by the grace of God."
Twice imprisoned in the 1980s by Doe's junta, Sirleaf fled into exile.
When Taylor launched a rebel invasion in 1989, Sirleaf briefly supported him, a move that still draws criticism today. The war saw children as young as 10 take up arms. Fighting uprooted half the country's 3 million people and killed 200,000.
A truce paved the way for presidential elections in 1997 that Sirleaf lost to Taylor. Theearned her the nickname "Iron Lady."
After another rebel war forced Taylor from power in 2003, Sirleaf ran for president again, this time winning a heated November run-off buoyed by a resume that included senior jobs at Citibank, the U.N. and the World Bank. Her soccer star rival, George Weah, was backed by ex-rebel leaders and many ex-combatants.