Rouhani, 68, a moderate cleric who secured re-election on May 19, promised that his country will pursue a "path of coexistence and interaction with the world."
Rouhani was first elected in 2013 with nearly 51 per cent of the vote.
Iran's state TV reported that more than 130 high-ranking officials from various countries and international organisations attended the ceremony in Tehran.
Among them was EU's foreign policy chief Federica Mogherini, who coordinates follow-up of Iran's nuclear deal.
It was the first time in Iran's history that a large number of foreign officials attended the president's inauguration ceremony.
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