The 44-year-old president, running for the ruling Georgian Dream-Democratic Georgia coalition, won the Oct 27 presidential poll with 62.12 percent of the vote, compared to 21.72 percent garnered by his closest rival Davit Bakradze from the former ruling United National Movement party.
Margvelashvili will serve his first five-year term. The constitution of the south Caucasus country allows a president a maximum of two full terms.
Among the foreign guests at the swearing-in ceremony was Lithuanian President Dalia Grybauskaite, whose country will host the European Union Eastern Partnership Summit later this month. Georgia is scheduled to attend the summit.
A total of 53 foreign delegations participated in Sunday's inauguration ceremony.
Prior to Sunday's event, Margvelashvili decided to hand over the hitherto presidential palace to the ministry of education for use as a future university campus.
"This will be an expression of gratitude for the fact that people trusted us in the elections," said Margvelashvili.
"Costs should be in compliance with the budget. The budget does not allow us the opportunity to live in luxurious palaces or to arrange luxurious inauguration," he said
The inauguration was held inside the Tbilisi parliamentary building, unlike previous ones which took place outside the building along the No. 1 Avenue of the Georgian capital.
"Unfortunately, there are still a lot of poor people in Georgia who need this money more," the new president said.