“I'm humbled and honoured and moved beyond words to be your governor," he said on Monday after taking the oath of office at a toned-down ceremony with some 8000 guests and reporters in attendance.
Schwarzenegger became the second movie star after Ronald Reagan to become the most populous US state's governor.
“Everybody knew they were taking a chance on a man with no governmental experience," said the apprentice moderate Republican politician.
While calling for unity among the state's people following the 7 October special vote that ousted former governor Gray Davis and elected the actor, Schwarzenegger warned that California's ballooning budget deficit and slow economy meant that tough times were ahead.
But he offered a message of hope and promised to work hard to ease the burden of the state's 35 million people, whatever their political affiliation.
The Austrian-born former Mr Universe bodybuilding champion said he had learned a lot from years of training and competing.
“When I thought I couldn't have lifted another ounce of weight, I learned that we are always stronger than we know and California is like that too," he said.
“When I thought I couldn't have lifted another ounce of weight, I learned that we are always stronger than we know and California is like that too"
“There is a massive weight that we must lift off our state. Alone I cannot lift it but together we can," he said.
But, saying he had an "immigrant's optimism", he called for residents of the state to show unity and confidence in the face of adversity.
He vowed to sort out the state's financial morass and sweep clean its lumbering bureaucracy of special interests and "politics as usual."
Schwarzenegger also announced that he would immediately repeal a disputed law passed by former Democratic governor Gray Davis tripling the state's car tax and call a special session of the state legislature to tackle the financial crisis.
“I have big hopes for California. President Reagan spoke of America as the shining city on a hill. I see California as the gold dream by the sea," he said.