After 12 years of right-wing National Party (PN) rule, Castro's Libre party takes the reins on the challenges facing Honduras.
Xiomara Castro has been sworn in as the first woman president of Honduras, vowing to reform the crime and poverty-stricken nation into a "socialist and democratic state."
Castro, 62, took the oath at a massive ceremony on Thursday attended by international dignitaries after a week of infighting in her Libre party that challenged her authority.
In her first official address at the Tegucigalpa National Stadium, Castro denounced "the social and economic tragedy confronting Honduras" and promised to make work of improving education, healthcare, security and employment.
She said she was inheriting a "bankrupt" country which she intended to reshape into a "socialist and democratic state."
Honduras's public debt is about $17 billion.
The oath was sworn before Judge Karla Romero, flanked by Castro's choice of Congress president, Luis Redondo, who draped the presidential sash over his new boss before a crowd of some 29,000.
Castro's election last November brought an end to 12 years of right-wing National Party (PN) rule that followed the ousting of her president husband Manuel Zelaya in a 2009 coup.
"Twelve years of struggle, 12 years of resistance. Today the people's government begins," Castro said on Twitter on Thursday.
Castro assumes office with a full load of tasks ahead of her.
Hondurans are fleeing the country in droves, often to the United States, in search of work and a better life.
Castro spoke of a poverty rate of 74 percent, a figure she said "in itself explains the caravans of thousands of people of all ages fleeing to the north, Mexico and the United States, looking for a place and a way to survive in spite of the risk to their lives" from gangs and smugglers along the way.
Adding to the exodus, Honduras's murder rate is nearly 40 per 100,000 inhabitants.
Among the crowd celebrating Castro's inauguration, seamstress Esther Lopez expressed hope that the situation "is going to change, because Xiomara has been supporting the cause of the poor for many hears and because of (her husband Manuel) 'Mel' Zelaya, who was a good president."