Ruak, 55, publicly swore he would "respect the constitution and engage for the well-being of the country" in a ceremony after midnight, hours before celebrations to mark 10 years of independence from Indonesia`s brutal occupation.
Ruak takes over from Jose Ramos-Horta, a Nobel laureate whose international stature gave prominence to the largely ceremonial role.
The new president made his pledge as the national anthem played in the background at Tasi Tolu, a beachside area on the outskirts of the capital Dili where the country declared independence from Indonesia on May 20, 2002.
Ruak signed a register, then amid applause by ordinary Timorese and guests that included Indonesian President Susilo Bambang Yudhoyono, he smiled and clasped his predecessor in his arms.
This is a crucial year for the country of 1.1 million also known as Timor-Leste. It will choose a new prime minister and government in general elections on July 7, then at year`s end will bid goodbye to UN forces stationed there since 1999.
Ruak won a run-off election last month that was widely lauded as peaceful and fair.
He takes over a country that is hobbled by extreme poverty, corruption and an over-reliance on energy revenues.
But the unstable nation has now enjoyed several years of peace. (*)