The 52-year-old hardliner took the oath of office for another four-year term at a ceremony in parliament, but outside police used pepper gas against demonstrators who claim his landslide election victory in June was fraudulent, witnesses said.
Hundreds of policemen, including riot police and members of the Basij volunteer Islamic militia, were on the streets outside parliament for the ceremony, where Ahmadinejad vowed that his election marked the beginning of major change for Iran and the world.
Wednesday´s ceremony was attended by about 240 of Iran´s 290 MPs as well as clerics, but notable by his absence was powerful cleric and former president Akbar Hashemi Rafsanjani, who has criticised the regime over the election crisis.
After taking the oath, Ahmadinejad will now set about forming a new government that is likely to remain on a collision course with the West, particularly over Iran´s controversial nuclear drive.
His re-election on June 12 had set off massive street protests, deadly violence, a raft of political trials, increasing divisions among the ruling elite and further isolated Iran on the world stage.
About 30 people were killed in the violence, hundreds wounded and around 2,000 initially arrested, while around 110 have been put on trial.
Ahmadinejad´s presidency was formally endorsed on Monday by supreme leader Ayatollah Ali Khamenei, who described him as "courageous, astute and hardworking."
Opposition leaders including Ahmadinejad´s defeated rival Mir Hossein Mousavi and former president Mohammad Khatami were pointedly absent on Monday, as was Rafsanjani who suffered an upset defeat to Ahmadinejad in 2005.
Iran´s judiciary chief on Tuesday urged the country´s bitterly divided political groups to unite.
"I hope all officials understand the situation and maintain unity," said Ayatollah Mahmoud Hashemi Shahrudi.
"I hope they do what is best for the revolution, the regime, and Islam and disappoint the enemies."
White House spokesman Robert Gibbs on Tuesday acknowledged Ahmadinejad as the "elected" president of Iran, but stopped short of declaring him the "legitimate" president.
"He´s the elected leader," Gibbs said, adding however that Washington had no plans to congratulate the firebrand leader on his inauguration.
Under President Barack Obama, the United States has made overtures for dialogue with Iran after three decades of severed ties, but Tehran has failed to respond and vowed to press on with its nuclear work.
Amnesty International´s secretary general Irene Khan said Iran, a country of 71 million people, was caught in a spiralling cycle of repression.
Wednesday´s inauguration should be "the moment for the supreme leader and those around him to turn the page on the gross violations that have punctuated recent weeks and have been an all too familiar hallmark for many years," she said in a statement.
Khamenei, who has given his full backing to Ahmadinejad, on Monday warned his protege that the "angry, wounded opposition" would continue challenging his government.
He also told Ahmadinejad to heed the views of his critics, in a possible reference to the row between the president and his own conservative supporters over recent controversial political appointments.
Ahmadinejad in his second term is expected to keep up Iran´s defiance of the international community over its nuclear programme which he aggressively pursued in his first stint despite UN sanctions.
Opponents accuse Ahmadinejad, who enjoyed windfall oil revenues in his first term, of mismanaging the economy, stoking inflation, wasting resources and manipulating statistics to cover his failures.
Iran´s stance towards close US ally Israel is also likely to harden further during the second term of Ahmadinejad, who has repeatedly said the Jewish state is doomed to disappear.
Israel, the Middle East´s sole if undeclared nuclear armed state, has stressed that it holds a military option to curb Tehran´s atomic ambitions.
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