Mr Mursi, the Muslim Brotherhood's candidate, took the oath before the supreme constitutional court.
Later, in a speech to Cairo University, he promised to restore the parliament dissolved by the military this month.
He said that the army, which has run Egypt for decades, must respect the will of the people.
President Mursi will have to sort out a very difficult relationship with an entrenched military, regional analyst Magdi Abdelhadi says.
The regime of former President Hosni Mubarak is still largely intact and many in it will not work with the new president, he adds.
Overthrown in February last year after mass pro-democracy demonstrations, Mubarak was sentenced to life imprisonment at the beginning of this month for failing to prevent the killing of protesters by the security forces.
Egypt, the biggest Arab nation, is a key US ally in the region, as well as one of the few states in the Arab world to maintain diplomatic relations with Israel.
Parliament was dissolved by the Supreme Council of the Armed Forces (Scaf), which assumed legislative powers under a controversial "interim constitutional declaration".
The Scaf is due to hand over power to Mr Mursi later on Saturday.
"The army now returns to his original role, protecting the nation and its borders," Mr Mursi said.
Parliament, the new president insisted, had been elected in a free and fair ballot and had been entrusted with drafting a new, democratic constitution.
He hailed those killed in the uprising against President Mubarak. Families of some of the dead were in the hall and they held up photos of their sons and daughters.
In the ceremony before the court, Mr Mursi said the Egyptian people had "laid the foundations for a new life, for full freedom, a genuine democracy, for putting the meaning and significance of the constitution and stability above everything else".
His government would be based on the democratic pillars of "the constitutional court, the Egyptian judiciary, and the executive and legislative powers".
Mr Mursi's oath of office had originally been scheduled to take place at the parliament, which is dominated by the Muslim Brotherhood-backed Freedom and Justice Party and other Islamists.
Mr Mursi said he was determined that the constitutional court, which had declared November's parliamentary election to be flawed, would remain "independent, strong, effective - away from any suspicion and abuse".
Unlike during the Mubarak days, Cairo traffic was not stopped for Saturday's ceremony - underlining Mr Mursi's wish to be seen as one of the people, says the BBC's Jon Leyne in the city.
Handling relations with the Scaf is likely to be a key test for Mr Mursi as he begins his term of office.
The Scaf had previously said it would hand over power to Mr Mursi by the end of June.
However, one of its members, Maj Gen Mohamed al-Assar, told Egyptian media that the head of Scaf, Field Marshal Hussein Tantawi, would remain as defence minister under Mr Mursi.
When the Scaf leader arrived at Cairo University for Mr Mursi's speech, hostile students standing outside chanted "The people want to execute the field marshal", according to Egyptian news website Al-Misri al-Yawm.
On Friday, Mr Mursi performed prayers at Cairo's al-Azhar mosque, one of the most prominent seats of learning in Sunni Islam.
He has sought to allay fears among some secular and Coptic Christian Egyptians that he will use his presidency to impose Islamic law.
Mr Mursi's campaign has said he plans to appoint a woman and a Coptic Christian as his vice-presidents.
In his speech at Cairo University, he said all Egyptians would be equal before the law.
Source: BBC News
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