Last month's presidential election, which officials said al-Sisi won with 97 percent of the vote, followed three years of upheaval since a popular uprising ended 30 years of rule by former air force commander Hosni Mubarak.
Western countries, who hoped the overthrow of Mubarak in 2011 would usher in a new era of democracy, have watched Egypt's political transition stumble.
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Morsi's year in power was tarnished by accusations that he usurped power, imposed the Brotherhood's views on Islam and mismanaged the economy, allegations he denied.
After al-Sisi deposed him and became Egypt's de facto ruler, security forces mounted one of the toughest crackdowns on the Brotherhood in its 86-year history. Hundreds were killed in street protests and thousands of others jailed.
Secular activists were eventually thrown in jail, even those who supported Morsi's fall, because they violated a new law that severely restricts protests.
Al-Sisi took the oath of office before the Supreme Constitutional Court at the tribunal's Nile-side headquarters in a suburb south of Cairo, the same venue where Morsi was sworn in two years ago.
Sunday was declared a national holiday and tight security was enforced by the police and military throughout Cairo.
The somber ceremony was held at a red carpeted hall adorned by Egypt's red, white and black flags and attended by the entire Cabinet of Prime Minister Ibrahim Mahlab as well as al-Sisi's wife and children.
Al-Sisi entered the hall walking side by side with the outgoing interim president Adly Mansour, who will now return to his post as chief justice of the Supreme Constitutional Court after nearly a year in office.
Outside the building, modeled to look like an ancient Egyptian temple, around a hundred al-Sisi supporters gathered, waving Egyptian flags and posters of the country's new president.