Festooned in a sash, garland and medals, the 89-year-old dismissed accusations the July 31 election that returned him to power was rigged and vowed to rejuvenate the foreign-dominated banking and mining sectors.
Mugabe's 33-year rule since Zimbabwe's independence has been marked a drive to transfer foreign-owned and white-owned assets, including farms, to blacks.
"I promise you better conditions," he told the 60,000 capacity crowd of supporters at a stadium in Harare.
"The mining sector will be the centrepiece of our economic recovery and growth. It should generate growth spurts across sector, reignite that economic miracle which must now happen."
Swearing-in ceremony of Zimbabwean President Robert Mugabe is inaugurated in Harare. Mugabe, 89, was sworn in for a five-year term. (AP Photo)
Mugabe's inner circle has faced decades of international sanctions over rights abuses, and the veteran leader said he expected the punitive measures to continue.
"Most likely we shall remain under these sanctions for much longer."
"We continue to look East," Mugabe said lampooning, Western countries which have called into question the legitimacy of his election victory."
Zimbabwean President Robert Mugabe and his wife Grace greet the crowd as they arrive for his inauguration in Harare. (AP Photo)
"We dismiss them as the vile ones whose moral turpitude we must mourn," he said venting against Britain, Australia, Canada and the United States."
Former colonial power Britain called Thursday for an "independent investigation" into the conduct of the election, which Mugabe officially won by a landslide.
Unlike previous low-key investitures, Thursday's event – replete with banners, flags and chants – carried strong echoes of Mugabe's inauguration as prime minister of a newly independent Zimbabwe in 1980.
A no-show by many leaders from neighbouring countries – including President Jacob Zuma of regional power-broker South Africa – did little to dampen enthusiasm.
A supporter of Zimbabwean President Robert Mugabe attends his inauguration in Harare. (AP Photo)
Neither did a boycott by opposition leader and former prime minister Morgan Tsvangirai, who insists the July 31 vote was stolen.
Mugabe was greeted in the stadium by thunderous cheers and whistling. On board a military truck he inspected assembled military personnel.
Gates to the Chinese-built stadium, the venue of Mugabe's inauguration as president in 1987, opened shortly after dawn.
The day was declared a public holiday, helping boost attendance.
"Mr Mugabe, you are one of a kind," sang a group of supporters slamming the sides of the minibus taking them to the stadium, while others waved fists as drivers honked their horns.
"It is a great day for Zimbabwe and the world will come to a standstill today," said Alfred Tome, the Harare provincial administrator and spokesman for the organisers.
A concert will include artists from South Africa, Zambia and Jamaica -- whose iconic singer Bob Marley played at Zimbabwe's independence event.
Banners around the oval stadium carried messages praising African leaders and denouncing Western governments accused of meddling in Zimbabwe's political affairs.
"Which African ever observed elections in Europe, America?" read one banner. "Africa has spoken, respect it's voice," said another.
Zimbabwean President Robert Mugabe arrives to his inauguration ceremony in Harare at the National 60,000-seat sports stadium. (AFP Photo)
The inauguration had been delayed after Tsvangirai challenged the poll results -- which he denounced as "massive fraud" -- in a petition to the Constitutional Court that was later withdrawn.
Among a series of complaints, Tsvangirai queried the suspiciously high number of voters who were turned away from polling stations in urban areas, which are considered opposition strongholds.
He also charged that his party's supporters in rural areas were intimidated by Mugabe party backers into feigning illiteracy and voting in the presence of police and election officers.
The Constitutional Court confirmed Mugabe as president and declared the elections "free, fair and credible", saying the results "reflected the free will of the people of Zimbabwe".
Zimbabweans, wearing tee-shirts bearing a portrait of Robert Mugabe, wave national flags as they greet President Robert Mugabe during his swearing-in ceremony in Harare. (AFP Photo)
'Farewell event for Mugabe'
Eldred Masunungure, a political scientist from the University of Zimbabwe, said the event was at once Mugabe's victory lap and his "last supper".
"This inauguration is being projected as the crowning of a victory of a struggle for the past 13 years against big Western powers," he said.
There is however also an "unintended meaning", he said. "It can be read as a farewell event for Mugabe. It reminds one of Jesus's Last Supper."
The electoral commission declared Mugabe winner with 61 percent of the vote, against 34 percent for former prime minister Tsvangirai.
The vote ended a shaky power-sharing government formed by Mugabe and Tsvangirai four years ago to avoid a tip into all-out conflict following a bloody presidential run-off election in 2008.
Local observers judged the elections flawed and Western powers have raised serious doubts over the vote.
But regional groupings the Southern African Development Community and the African Union were less critical.