U.S. President Barack Obama summoned a divided nation Monday to act with "passion and dedication" to broaden equality and prosperity at home, nurture democracy around the world and combat global warming as he embarked on a second term.

"Now, more than ever, we must do these things as one nation, as one people," the 44th president declared in a second inaugural address that broke new ground by assigning gay rights a prominent place in the wider struggle for equality for all.

"America's possibilities are limitless, for we possess all the qualities that this world without boundaries demands: youth and drive; diversity and openness; an endless capacity for risk and a gift for reinvention.

"My fellow Americans, we are made for this moment, and we will seize it — so long as we seize it together."

However, Republicans were less than thrilled with his calls for "collective action" to confront challenges and his statement that "progress does not compel us to settle centuries-long debates about the role of government for all time, but it does require us to act in our time."

John McCain, the Arizona senator who lost to Obama in 2008, said he "didn't hear any conciliatory remarks. I didn't see any specific reference like, 'I reach out my hand to the other side of the aisle.'"

A generation of Americans has been tested, Obama said shortly after he took the oath of office with his hand on two Bibles — one used by President Abraham Lincoln and one used by Martin Luther King Jr.

"A decade of war is now ending. An economic recovery has begun. America's possibilities are limitless, for we possess all the qualities that this world without boundaries demands."

In his relatively short, 18-minute speech, Obama broadly spelled out some of the issues of his second term.

"Our journey is not complete until our wives, our mothers, and daughters can earn a living equal to their efforts," he said 

"Our journey is not complete until our gay brothers and sisters are treated like anyone else under the law — for if we are truly created equal, then surely the love we commit to one another must be equal as well."

His speech also touched on climate change, immigration and the financial issues facing the United States.

"We must make the hard choices to reduce the cost of health care and the size of our deficit. But we reject the belief that America must choose between caring for the generation that built this country and investing in the generation that will build its future."

Obama faces a nation riven by partisan disunity, a still-weak economy and an array of challenges abroad.

The president also faces a less charmed standing on the world stage, where expectations for him had been so high four years ago that he was given the Nobel Peace Prize just months into his presidency. "Only very rarely has a person to the same extent as Obama captured the world's attention and given its people hope for a better future," the Nobel announcement in 2009 read.

While nearly all U.S. troops have left Iraq a decade after the invasion, in Afghanistan the American military has yet to hand over responsibility for national security to local government forces. And some analysts argue that ongoing U.S. drone strikes against suspected militants in countries such as Yemen and Pakistan constitute another American conflict which Obama will have to navigate in his second term.

Smaller turnout than 2009

The president, his wife, Michelle Obama, and daughters Sasha and Malia began the day at St. John's Episcopal church, which was built in 1812 and is known as the church of presidents. Obama later had coffee at the White House with congressional leaders, who play major roles in how the country is governed.

The events of the 57th inauguration day, including parades and fancy dress balls, were expected to have less of the effervescence of four years ago, when the 1.8 million people packed into central Washington knew they were witnessing history. Obama is now older, greyer and more entrenched in the politics he once tried rise above. Officials were expecting 500,000 to 700,000 people to turn out Monday.

'Now, more than ever, we must do these things as one nation, as one people.'—U.S. President Barack Obama

Reporting from Washington, CBC's Paul Hunter said that while the day's events are ceremonial and the crowd was smaller than four years ago, "hundreds of thousands of Americans have come out anyway."

He said the crowd was buoyant and the mood in the capital was "like the Fourth of July in January."

U.S. Supreme Court Justice Sonia Sotomayor swore in Vice-President Joseph Biden before Chief Justice John Roberts swore in Obama.

"Congratulations and Godspeed," House Speaker John Boehner, a Republican, said to Obama and Biden as he presented them with flags that had flown atop the Capitol.

The ceremony included musical performances by the Brooklyn Tabernacle Choir, James Taylor, Kelly Clarkson and Beyoncé, who performed the national anthem.

The inauguration parade was a reflection of American musicality and diversity that featured military units, bands, floats, the Chinese American Community Center Folk Dance Troupe from Hockessin, Del., and the Isiserettes Drill & Drum Corps from Des Moines, Iowa.

The crowds were several rows deep along parts of the route, and security was intense. More than a dozen vehicles flanked the president's limousine as it rolled down Pennsylvania Avenue, and several agents walked alongside.

As recent predecessors have, the president emerged from his car and walked several blocks on foot. His wife, Michelle, was with him, and the two held hands while acknowledging the cheers from well-wishers during two separate strolls along the route.

A short time later, accompanied by their children and the vice-president and his family, the first couple settled in to view the parade from a reviewing stand built in front of the White House.

A pair of nighttime inaugural balls completed the official proceedings, with thousands on the guest lists.

Seen as strong leader

As he enters his second term, Americans increasingly see Obama as a strong leader, someone who stands up for his beliefs and is able to get things done, according to a survey by the Pew Research Center for the People & the Press. The survey shows him with a 52 per cent job approval rating, among the highest rankings since early in his presidency. His personal favourability, 59 per cent, has rebounded from a low of 50 per cent in the 2012 campaign against Republican Mitt Romney.

"The real Barack Obama, who has had to disguise himself to a certain extent because of bipartisanship, we will now see," said Neil Macdonald, CBC's senior Washington correspondent. "And we'll see whether or not the American people like what they see."

When the partying is done on Monday, it's back to business for a president who is leading a nation that is, perhaps, as divided as at any time since the Civil War 150 years ago. That conflict put down a rebellion by southern states and ended slavery.

In light of the nation's troubled racial history, Obama's election to the White House in 2008 as the first black president was seen by many as a turning point. In his first inaugural address, Obama vowed to moderate the partisan anger engulfing the country, but the nation is only more divided four years on.

While Obama convincingly won a second term, the jubilation that surrounded him four years ago is subdued this time around — a reality for second-term presidents. He guided the country through many crushing challenges after taking office in 2009: ending the Iraq war, putting the Afghan war on a course toward U.S. withdrawal and saving the collapsing economy. He won approval for a sweeping health-care overhaul.

Yet onerous problems remain, and his success in resolving them will define his place in history.

Obama's Democrats and opposition Republicans, who control the House of Representatives, are at political war about gun control and managing the nation's finances He also faces bitter confrontation with Republicans over avoiding a default on the nation's debts, cutting the spiraling federal deficit and preventing Iran from building a nuclear weapon.

Obama may have to decide whether to launch a strike against Iran's nuclear facilities, something he is loath to do. Washington and its allies believe Iran is trying to build nuclear weapons. Iran says its program is intended for producing electricity. Obama has vowed to keep Iran from crossing the line to nuclear-armed status, but insists there is still time for diplomacy. However, Israel is pressuring him to take military action sooner rather than later.

The president will also have to deal with the civil war in Syria, Israel-Palestinian tensions, a chill in relations with Russia and a series of maritime disputes in Asia. The administration has long talked of making a "pivot" toward Asia after the U.S. has directed much of its energy to the Middle East in the past decade.

Canadian leaders will be waiting to see whether Obama approves TransCanada's Keystone XL pipeline.

With files from CBC News