The new king has been assuming the responsibilities of monarch since his father abdicated nearly three years ago in an effort to allow the "leadership of a new king and a democratic system of government".
But the coronation was delayed as the century-old Wangchuk dynasty waited for astrologers to give an auspicious date.
The three-day ceremony caps the former king's vision of reforming and modernising the deeply traditional and insular nation.
|The new king faces the challenge of balancing traditional with modern values [GALLO/GETTY]
"The best time to change a political system is when the country enjoys stability and peace," the deeply revered former king, who is 52, had said when he first initiated the reform process in 2005.
"Why wait for a revolution? Why crown an heir only when the nation is in mourning for a late king?"
Bhutan, a nation of just over 600,000 people wedged in remote hills and mountains between India and China, held its first democratic elections for a new parliament and prime minister in March.
The new king - the world's youngest reigning monarch - will continue to face the challenge of striking a balance between traditional values and exposure to the world, especially with the younger generation having access to satellite television and the internet.
Bhutan had no roads or currency until the 1960s and allowed television only in 1999.
The new king has pledged to maintain his father's unique philosophy of improving "gross national happiness," and not common economic indicators, to ensure well-being in the country.
Despite being tucked away in the Himalayas, however, the tiny nation has not been immune to modern problems such as drugs and crime, as well as potential external threats.
"The changes we've had are good but there have also been less good things happening," Sonam Subha, a local trader, said. "I'm sure our king will keep us safe."