Standing on top of a giant platform on the Capitol steps overlooking the National Mall, the 44th US President looked out onto a sea of Stars and Stripes flags as he addressed an enthusiastic crowd of 700,000 people.
It was, however, less than half the record 1.8 million spectators who gathered in Washington four years ago.
While the ceremonial swearing-in was filled with all the traditional pomp and pageantry, this was scaled back compared to the historic start of his presidency in 2009, when Mr Obama swept into office on a wave of hope and change as America's first black president.
Calling for unity of purpose, he said: "Our country cannot succeed when a shrinking few do well and a growing many barely make it.
"We believe that America's prosperity must rest upon the broad shoulders of a rising middle class."
The 51-year-old Democrat, his hair visibly greyer than when he first took office, arrived at his second inauguration on solid footing.
His poll numbers are up, Republicans are on the defensive and his first-term accomplishments included a healthcare overhaul, ending the Iraq war and killing Osama bin Laden.
Yet fights are looming over fiscal budgets, gun control and immigration, with his Republican opponents ready to oppose him at almost every turn and Mr Obama still seemingly at a loss over how to engage them in deal-making.
Nonetheless, the President confidently set out his policy priorities across the economy, immigration reform and gay rights. He also challenged Washington to change the tone and nature of its politics.
He said: "We cannot mistake absolutism for principle or substitute spectacle for politics or treat name-calling as reasoned debate. We must act, knowing that today's victories will be only partial."
The President said the current generations of Americans had been tested by crises that had steeled their resolve and proved their resilience.
He said: "A decade of war is now ending. An economic recovery has begun. America's possibilities are limitless. My fellow Americans, we are made for this moment and we will seize it – so long as we seize it together."
Surprisingly, given he gave little priority to climate change in his first term, Mr Obama devoted several sentences to it, saying failure on the issue "would betray our children and future generations".
He said: "Some may still deny the overwhelming judgment of science but none can avoid the devastating impact of raging fires and crippling drought and more powerful storms."
The President also highlighted his campaign to curb gun violence, referring to the quiet Connecticut town where last month 20 children were gunned down in a primary school shooting.
He said: "Our journey is not complete until all our children, from the streets of Detroit to the hills of Appalachia to the quiet lanes of Newtown, know that they are cared for, and cherished, and always safe from harm."
Moments earlier, Mr Obama had placed his hand on two Bibles – one used by Martin Luther King and the other by Abraham Lincoln -–and recited the brief oath of office.
His wife, Michelle, held the Bibles, one on top of the other, as their daughters Malia and Sasha looked on.
After Beyonce sang the national anthem and just before he disappeared into the Capitol building, the President turned to look back over the massed crowd and said: "I want to take a look, one more time. I'm not going to see this again."