Huge cheers rang out as Kejriwal, who arrived for the ceremony on the city's subway, took the oath office in front of tens of thousands of supporters assembled in a Delhi park wearing white caps emblazoned with Kejriwal's slogan, "I am a common man".
"I will do my duties as a minister honestly, without any fear or bias," Kejriwal said as he took the oath on a flower bedecked dais.
Cries of "Long Live the Aam Admi Party" and "Mother India" rang out from the sea of supporters while some waved placards saying "Today Delhi, Tomorrow the Country."
Police estimates of the crowd ranged as high as 100,000.
Kejriwal's upstart Aam Admi Party made a stunning electoral debut, winning 28 assembly seats in recent state polls and delivering a stinging defeat to the Congress party which rules at the national level.
"It is the common man's victory," Kejriwal declared ahead of taking the subway to his swearing-in - unprecedented for any Indian dignitary going to an oath-taking ceremony.
"If we all come together then we can can change the country," he said.
The former tax inspector's decision to use public transport echoes his pre-poll promise to end the VIP culture of Delhi's political elite and set a down-to-earth tone for his new administration.
No dignitaries had been formally invited to Ramlila Maidan where Kejriwal was due to take the oath.
The grounds are considered ground zero of India's corruption movement where some of the biggest rallies against a string of government graft scandals were held two years ago.
Some observers believe Kejriwal's victory in Delhi could be mark the start of a national election campaign.
The rookie party's symbol is a broom - to underline its commitment to sweeping away India's culture of bribery and corruption that critics say has become endemic in politics and in daily life.
Kejriwal, named top news weekly India Today's Newsmaker Of The Year, eschewed the customary motorcade with its wailing sirens to take him to the swearing-in ceremony.
He has declared that he will abolish the culture of privilege surrounding New Delhi's politicians.
Unlike his predecessors, Kejriwal, whose backers range from taxi drivers and teachers to business proprietors and servants, has said he and his ministers will not occupy the sprawling bungalows surrounded by lush lawns built by India's former British colonial rulers.
Kejriwal plans to keep living in his fourth-storey flat in a Delhi suburb.
"He has emerged as a new moral force in Indian politics," said India Today editor-in-chief Aroon Purie in an editorial. "The challenge now is to live up to the expectations of the voters who see him as a saviour."
Kejriwal came to national prominence as an advisor to elderly social activist Anna Hazare, whose anti-corruption drive galvanised the country in 2011.
Kejriwal then went on to found his own party after the two men fell out over strategy. Hazare, now 76, believed the anti-corruption fight should remain non-partisan while Kejriwal felt he should enter the electoral fray.
The Hindu nationalist Bharatiya Janata Party, tipped to win general elections due by May, came first with 31 seats in the Delhi polls but was short of a majority. Kejriwal will govern with outside support from Congress, which was reduced to eight seats.
Kejriwal initially refused to team up with Congress, which he had denounced as brazenly corrupt, but bowed to a flood of emails and text messages from Delhi citizens urging him to form a government.
"I voted for him and I want to see him make a difference in politics," Munshi, a security guard, who goes by one name, told AFP.
The day before his swearing in, bureaucrats got a taste of Kejriwal's new-broom style, grilling officials about local problems.
He faces no easy task in governing Delhi, one of the world's most congested, slum-ridden and polluted cities, lacking proper sanitation and reliable power and whose roads are full of bone-jolting potholes.
The rout of Congress in Delhi and three other state polls this month has been seen as a sign that the powerful Nehru-Gandhi dynasty, which has given India three prime ministers since independence in 1947, may be about to lose office on a national scale.
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Mubarak ho Mr AK and best of luck sir...
Kejriwal has set a new precedence in the Indian political scene. The first CM of a state ie all important India's capital, has refused security cover, official residence, car, and all other facilities which he can be easily available to him. He has promised to eliminate corruption completely and solve many other issues as well which major political parties feel is a tall order. The man with no political background and a first timer with his recently formed AAM ADMI PARTY has routed the oldest Congress party in Delhi defeating three time Chief minister Shiela Dixit, is giving jitters to BJP as well who is hoping to rule the country in 2014.
Good luck to AK in the political jungle! We also need the 'broom' in Pakistan to wipe out the current politicians - 99% corrupt and 1% honest but incompetent.
Arvind Kejriwal,AK-45 replaces AK-47.Broom wielding common man's march started..Today Delhi's CM tomorrow India's PM.Salut....