Barack Obama took power as the first black president of the United States president on Tuesday and quickly turned the page on the Bush years, urging Americans to rally to end the worst economic crisis in generations and repair the US image abroad.
"Starting today, we must pick ourselves up, dust ourselves off, and begin again the work of remaking America," Mr Obama, 47, said, addressing an exuberant sea of people in an inaugural speech that was optimistic but realistic about the challenges ahead.
He pledged bold and swift action to bring new life to the US economy and declared to millions watching abroad: "We are ready to lead once more."
Within hours of formally taking control of the White House, Mr Obama's team has directed American government agencies and departments to freeze all pending regulations so they can be reviewed.
Underscoring the tough road ahead, Wall Street ushered in the new presidency with a record Inauguration Day slide amid signs the global banking crisis was far from over. The benchmark Dow Jones Industrial Average shed 332 points or 4% to 7,949.09 while the Standard & Poor's dropped 5.2%.
Hundreds of thousands of people erupted in cheers on Washington's National Mall grounds as they watched Mr Obama stand with one hand raised, one hand on a Bible used to swear in Abraham Lincoln in 1861, and repeat the brief oath to become the 44th US president.
Beaming, the new president kissed his wife, Michelle, and his school-age daughters, Malia and Sasha. Then he turned to the crowds stretching into the distance on a cold, wintry day. "Obama, Obama," the crowd cheered.
Mr Obama, a Democrat, succeeded the deeply unpopular Republican George W Bush, who served two terms and left office having plumbed record lows in approval ratings and leaving a legacy of two wars and an economy in recession.
Mr Obama offered a sharp break from Mr Bush, emphasising the need for sacrifice and pledging to restore US global standing, responsibly end the war in Iraq, and focus less on the size of government and more on whether it works.
During a triumphant ride down Pennsylvania Avenue to the White House in a heavily armoured limousine, Mr Obama and his wife thrilled cheering crowds by getting out of the limo and walking a part of the way on foot.
Following the inauguration, Mr Obama attended a night of balls to celebrate taking office.
US economy 'top priority'
Mr Obama has to hit the ground running given the state of the economy and the US Senate confirmed several key Obama appointments, including Steven Chu as energy secretary and Tom Vilsack for agriculture.
The Senate Finance Committee is expected to vote on Timothy Geithner as treasury secretary on Thursday. Hillary Clinton, Mr Obama's fierce rival for the Democratic presidential nomination and his choice as secretary of state, is expected to be approved by the full Senate on Wednesday.
The inauguration of President Obama the son of a black Kenyan father and a white mother from Kansas, was steeped in symbolism for African-Americans, who for generations suffered slavery and then racial segregation that made them second-class citizens.
Polls show widespread US public support for Mr Obama and optimism about the coming four years of his presidency. But he sought to temper soaring expectations with reality, citing the worst US economic conditions in 70 years and the Iraq and Afghanistan wars as having put the country in crisis.
"What is required of us now is a new era of responsibility," he said.
Mr Obama said the "badly weakened" US economy will be a top priority as he works with the Democratic-controlled US Congress on an estimated $US825 billion economic stimulus package.
The economy had fallen victim to "greed and irresponsibility" and an avoidance of hard choices, Mr Obama said. The economic crisis showed that markets can spin out of control "without a watchful eye," he added, signaling he would put a priority on revamping financial regulations.
New start with Muslims pledged
Mr Obama vowed the US would leave Iraq "responsibly" and help Afghanistan win a hard-earned peace.
He did not provide a specific timetable for a US withdrawal from Iraq, but under a US-Iraqi agreement, American troops would depart by the end of 2011. Mr Obama has pledged to increase US troop strength in Afghanistan to turn back a resurgent Taliban.
There has been broad world disapproval of many Bush policies in the US war on terrorism that Mr Bush declared after the September 11 attacks in 2001 that deeply shaped his eight years in office.
After years of tense relations with Muslims, Mr Obama offered conciliatory words to the Islamic community, saying he would seek a "new way forward" based on mutual interest and mutual respect.
"To the Muslim world, we seek a new way forward, based on mutual interest and mutual respect," he said.
Several years of Mr Obama's childhood were spent in Indonesia. His mother married a Muslim Indonesian after the end of her first marriage to a Kenyan student, Mr Obama's father.
However, on the issue of terrorism, he said: "You cannot outlast us, and we will defeat you."
"To those who cling to power through corruption and deceit and the silencing of dissent, know that you are on the wrong side of history; but that we will extend a hand if you are willing to unclench your fist."
Mr Obama also pledged that the US will play its role in ushering in a new era of world peace.