He won re-election on June 24, with 52.59 per cent of votes. Under controversial constitutional reforms approved by a referendum past year, parliament has been weakened and the post of prime minister abolished.
Since a failed coup attempt two years ago he's fired 125,000 workers, the latest 18,000 at the weekend, and jailed 160,000 people including opponents.
The now defunct government of Prime Minister Binali Yildirim issued a last-minute decree revamping ministries to conform to the new executive presidency structure.
Erdogan referred to the principles of Mustafa Kemal Ataturk, the founder of the modern Turkish Republic.
Speaking to journalists after the ceremony, Erdogan said: "Everything was good in front of the nation, I hope it will be better in the future". It stood at 4.5655 against the dollar at 1508 GMT, strengthening slightly from Friday's close of 4.5745.
But President Erdogan has put religion at the heart of the country and has distanced it from the West.
Erdogan, who has transformed Turkey by allowing Islam to play a greater role in public life and boosting the country's worldwide stature, will take his oath nearly two years after defeating a bloody attempted coup.
Investors hoped that Erdogan would appoint a treasury and finance minister who had pursued a more balanced fiscal approach.
State news agency Anadolu said Erdogan's inauguration celebration was attended by Venezuelan President Nicolas Maduro, Russian Prime Minister Dmitry Medvedev and Sudanese President Omar Hassan al-Bashir, wanted for war crimes by the International Criminal Court. "We are leaving behind the system that has in the past cost our country a heavy price in political and economic chaos".
Separately on Tuesday, a president decree carried by the Turkish Official Gazette appointed ground forces Commander General Yasar Guler as the new chief of the general staff, replacing Akar. Ties with the United States and other North Atlantic Treaty Organisation partners also frayed, but Turkey remains crucial for any hope of stability in Syria and Iraq and curbing refugee flows to Europe.
"When you scrap the five-year term you remove this shield", he said.
Empowered by a popular mandate on the back of a convincing electoral victory, Erdoğan will have to address urgent questions in Turkey such as the fate of more than 3 million Syrian refugees living in the country, the progress of the war across the border, a faltering economy and a weakening currency.
It has also emerged that Mehmet Simsek, a former banker at Merrill Lynch who acted as deputy prime minister in Turkey's previous government, will not hold a position in the new cabinet.
Erdogan said on Saturday that he would tackle "the structural economic problems" of high interest rates and inflation and a wide current account deficit.