Schwarzenegger's wife, Maria Shriver, held the Bible while California Supreme Court Chief Justice Ronald George administered the oath of office.
"I am humbled, I am honored and I am moved beyond words to be your governor," the 56-year-old Austrian immigrant said after being sworn in.
"I enter this office beholden to no one except you, my fellow citizens. I pledge my governorship to your interests, not to special interests," he added.
Although he had no prior experience as an elected official, the Republican Schwarzenegger was swept into office in the Oct. 7 election that ousted Democratic Gov. Gray Davis, reviled by the voters for handling of the state's ailing economy.
The ceremony, while steeped in tradition, was void of the pageantry often associated with California inaugurations.
Bitterness over the divisive recall vote and the state's financial troubles prompted Schwarzenegger to put a damper on livelier festivities — although plenty of celebrities and journalists were on hand. Former Miss America Vanessa Williams, who appeared with Schwarzenegger in the 1996 film "Eraser," sang the national anthem.
Nearly 740 journalists were expected to cover the ceremony — numbers similar to a presidential inauguration. Fifteen dignitaries from 13 countries were in attendance, including representatives from Canada, Egypt, Austria and several from Mexico.
The new governor was surrounded by his four children, who had remained out of public view during much of the recall campaign.
Later in the day, Schwarzenegger was to attend three events: a luncheon inside the Capitol rotunda for state and federal officials, a private family gathering across the street and an invitation-only reception sponsored by the state Chamber of Commerce.
He was scheduled to return to the Capitol by mid-afternoon to start the business of running California's government, a job that became more daunting over the weekend when his chief financial deputy pegged the state budget deficit at $25 billion — far more than other estimates.
An immigrant who arrived in the United States at the age 21 barely able to speak English, Schwarzenegger is a quick study who impressed even some of his critics with his raw political skills. But he has nonetheless also made many promises to voters that will be hard to keep, including repealing a big hike in the car tax on his first day in office. That will add an estimated $4 billion to the deficit.
Schwarzenegger has said he will call the Legislature back into session, probably Tuesday, to deal with a range of issues including budget cuts, reform of the state's worker compensation system and a repeal of a new law that lets undocumented workers get driver's licenses.
Democrats, who control both houses of the Legislature, have said that they will be willing to give the new governor a chance, but most observers agree that the political goodwill will not last, presenting the new governor with even more challenges.
The recall movement was launched in February by grass-roots activists angered over the state's budget woes and the prospect of higher taxes. Republican Rep. Darrell Issa bankrolled the effort, spending $1.7 million of his fortune to get the measure on the ballot.
Schwarzenegger quickly became a contender after announcing his candidacy Aug. 6 on "The Tonight Show With Jay Leno."
The "Terminator" star cast himself as an outsider — he showed up at the Capitol on Sunday holding a broom to "clean house" — and claimed to be beholden to no special interests, even though he, too, accepted large campaign contributions from developers and major business interests.
In the days before the election, the Los Angeles Times published allegations that Schwarzenegger had groped several women over the past 30 years. Schwarzenegger admitted he had "behaved badly sometimes," but with Shriver a fixture at his side, he quickly recovered.
Schwarzenegger won with 48 percent of the vote over a list of 134 other candidates vying to replace Davis, who was bounced by 55 percent of the voters.
Stars such as Rob Lowe, Rob Reiner and Tom Arnold were seen around town before the ceremony, and former U.S. Secretary of State George Shultz was among a group of transition advisers who met with Schwarzenegger.
In contrast to Monday's relatively sober proceedings, the 1999 inaugural for Davis included a $3.7 million event featuring Lionel Richie, Kenny G and a reading by "Happy Days" actor Henry Winkler. And in 1995, Natalie Cole sang at then-Gov. Pete Wilson's inaugural gala.
This time, the inauguration promises to be well-documented.
Requests for press credentials came from TV crews and print journalists around the globe — including Japan, Australia, France, Germany, the United Kingdom and, of course, Schwarzenegger's native Austria.