WASHINGTON - Barack Obama assumed the mantle of the U.S. presidency on Tuesday, assuring America's allies he'll rebuild the world's shattered economy while repairing strained friendships as millions cheered the apparent arrival of a new age of political idealism.

The United States will now eschew the "worn-out dogma" of the confrontational rule of George W. Bush and develop a more open and conciliatory relationship with the rest of the world.

"Our Founding Fathers, faced with perils we can scarcely imagine, drafted a charter to assure the rule of law and the rights of man, a charter expanded by the blood of generations," Obama said.

"Those ideals still light the world, and we will not give them up for expedience's sake. And so to all other peoples and governments who are watching today, from the grandest capitals to the small village where my father was born: know that America is a friend of each nation and every man, woman, and child who seeks a future of peace and dignity."

Amid a roar from the euphoric millions amassed to watch him make history as the country's first black president, he concluded: "We are ready to lead once more."

A sea of citizens from all walks of life shivered in the cold to see Obama deliver an address that seemed at times designed to remind them he was no saviour, merely a man now overseeing a country embroiled in two separate wars in far-away lands and battling another enemy on the home front: a free-falling economy.

"Today I say to you that the challenges we face are real," he said as they spilled from the base of the Capitol crammed into the expansive grassy stretch known as the National Mall.

"They are serious and they are many. They will not be met easily or in a short span of time. But know this, America -- they will be met."

A couple of hours later, Obama did something unusual for a politician at the heart of the biggest security detail for any inauguration in American history: he stepped out of his limousine.

In the midst of the inaugural parade, Obama went for an impromptu stroll down the middle of Pennsylvania Avenue with wife Michelle on his arm, waving a gloved hand at delighted spectators and well-wishers who no doubt had expected little more than to glimpse the armoured Cadillac known as "The Beast."

Flanked by taut-lipped security guards and Vice President Joe Biden, the Obamas walked for several minutes before returning to the security of the vehicle. They emerged a short time later to walk a short distance at the end of the parade route, into a glass-enclosed viewing area where they watched the rest of the parade.

By days' end, the Obamas became the latest residents of an ornate home constructed by slaves more than 200 years ago.

For that reason alone, this was an inauguration for the ages, a watershed moment in which America's racial barrier was forever shattered after a shameful history of slavery and segregation.

Clad in a red tie and white shirt under a dark overcoat adorned with an American flag pin, Obama flashed a smile when he first stepped to the dais to take his oath. He later thanked Bush, who was among the onlookers at the Capitol, for his years of public service, even as the new president took on the formidable task of undoing the damage of his predecessor's administration.

"Our challenges may be new. The instruments with which we meet them may be new. But those values upon which our success depends -- hard work and honesty, courage and fair play, tolerance and curiosity, loyalty and patriotism -- these things are old," he said.

"What is demanded then is a return to these truths. What is required of us now is a new era of responsibility, a recognition -- on the part of every American -- that we have duties to ourselves, our nation, and the world, duties that we do not grudgingly accept but rather seize gladly."

Daniele Magditsch, 20, of Brampton, Ont., a student of environmental biology at the University of Guelph, was on hand as part of the University Presidential Inaugural Conference.

Despite getting up at 2 a.m. in hopes of securing a good vantage point, Magditsch couldn't get onto the Mall because of the massive crowds that had already gathered in front of the Capitol, and was forced to watch the ceremony on television.

Still, she wouldn't have missed it for the world.

"It was definitely worth it," Magditsch said. "I almost started crying when he got sworn in, so it was pretty emotional .... Everyone here was clapping and cheering, so it was great to be part of all that."

For Obama, the hard part begins now, she added.

"Everyone's really counting on him to bring change, not only to the U.S., but to the whole world."

Tuesday's events were sullied only twice: once when Chief Justice John Roberts fumbled the oath of office, then again, more seriously, when Sen. Ted Kennedy suffered a seizure during the inaugural luncheon and was taken to hospital.

His doctors later reported Kennedy, a fervent Obama supporter who has been diagnosed with brain cancer, was fine, his seizure having been brought on by fatigue.

Also on hand for the ceremony were Obama's other living predecessors Jimmy Carter, George H.W. Bush and Bill Clinton, as well as Laura Bush and Lynne Cheney, wife of Dick Cheney.

Prior to the ceremony, Cheney -- sitting in a wheelchair with a wooden cane across his lap after straining his back last week -- emerged onto the inauguration platform with Bush, who later gave a final wave goodbye at Andrews Air Force Base before boarding a flight that would take him into retirement at his ranch in Crawford, Tex.

Obama mentioned Iraq and Afghanistan by name as he pledged to peacefully end America's two unpopular wars, to mitigate the threat of nuclear war and tackle global warming.

But he also had a pointed message for America's enemies.

"We will not apologize for our way of life, nor will we waver in its defence," Obama said to rousing cheers from the crowd. "For those who seek to advance their aims by inducing terror and slaughtering innocents, we say to you now that our spirit is stronger and cannot be broken; you cannot outlast us, and we will defeat you."

Millions of people have been in D.C. for days, cramming the streets snapping pictures, buying all manner of Obama memorabilia and attending a massive outdoor concert at Lincoln Memorial in honour of their political hero.

For many of them, Obama's successful run for the presidency not only represents a long-overdue demise of the race barrier, but a return to honour in politics the likes of which hasn't been seen since the 1960s with inspirational figures like Martin Luther King Jr. and Robert F. Kennedy.

Americans sobered by enduring conflicts in Iraq and Afghanistan and the ongoing economic meltdown are hopeful the new U.S. president will deliver on the impending era of hope he's promised since his momentous electoral victory in November.