The celebrations, which included a massive show of military muscle in the annual Red Square parade in Moscow and in the Crimean port of Sevastopol, came as Ukraine is struggling with its most serious political crisis in decades.
Pro-Russia insurgents in the east are fighting the government in Kiev and preparing to hold a referendum on Sunday on secession.
Putin hailed the incorporation of Crimea into Russia as "return to the Motherland" and a tribute to the "historical justice and the memory of our ancestors." The peninsula of 2 million people had been part of Ukraine from 1954 until March.
Residents flooded the city's streets to watch.
With minutes, Ukraine's Foreign Ministry protested Putin's visit as trampling on Ukraine's sovereignty and international law, comments echoed by NATO Secretary General Anders Fogh Rasmussen.
"We consider the Russian annexation of Crimea to be illegal, illegitimate and we don't recognise it," Fogh Rasmussen told reporters in Tallinn, Estonia. "We still consider Crimea as Ukrainian territory and from my knowledge the Ukrainian authorities haven't invited Putin to visit Crimea, so from that point of view his visit to Crimea is inappropriate."
This year it comes as Russia is locked in the worst crisis with the West since the end of the Cold War.
Earlier in Moscow, Putin watched as about 11,000 Russian troops proudly marched across Red Square to the tunes of marches and patriotic songs. They were followed by columns of dozens of tanks and rocket launchers as 70 combat aircraft, including giant nuclear-capable strategic bombers, roared overhead.