The oath-taking session started at 3pm (1200 GMT) and will conclude at about midnight.
Ahmet Necdet Sezer, Turkey's president, was expected to ask Erdogan on Monday to form the next government, the state-run Anatolia news agency said on Saturday.
The new parliament is to be sworn in according to the results of a general election in July.
The election was due in September but was brough forward by Erdogan after he failed to win the necessary parliamentary quorum for his choice as president.
The closest opposition to the AKP in the new parliament comes from the Republican People's party, which will hold 99 seats.
The Nationalist Action Party, a far-right group, will have 70 seats after a five-year absence, while the centre-left Democratic Left Party will hold 13 seats.
A Kurdish independent also adds to the seats held by Kurdish representatives, taking the total to 21.
The independent has said that he may support the larger Kurdish party. For many Kurds, the Kurdish Democratic Society's return to parliament revives hopes for a fresh struggle for more rights.
But many Turks are afraid of a party suspected of being under the influence of the Kurdistan Worker's Party (PKK), which is deemed to be a terrorist organisation by the US and EU.
|Abdullah Gul appears set to remain as the ruling |
party's choice of presidential candidate [AFP]
After the new parliament is sworn in, the process to elect a new president will begin.
In May, Erdogan failed to win parliamentary backing for his preferred candidate Abdullah Gul, Turkey's foreign minister.
Abdullah Gul failed to win backing from Turkey's main opposition in May [AFP] Opposition politicians rejected Gul over his alleged ties to political Islam, while many Turks feared that the government was trying to scrap Turkey's secular principles.
Widespread pro-secularist public street demonstrations came after Gul's nomination.
The main opposition party's boycott of the presidential vote meant that a quorum could not be reached - and prompted Erdogan to call a general election four months early.
Nazinine Moshiri, Al Jazeera's correspondent in Ankara, said the ruling party seems set to continue supporting its previous presidential candidate in a new parliamentary vote.
“It looks like the AKP still want to put Abdullah Gul forward but it seems that when the vote takes place next time, opposition parties will be there to vote," she said.
"The army generals say they will not be supporting Gul but there is not much they can do. In 2007, we are not expecting to see tanks rolling through the streets of Ankara."
Also on Saturday, Turkey's armed forces said 23 officers had been dismissed for "reactionary activities" or "acts prejudicial to the discipline and prestige of the armed forces".
The sackings were decided during the annual meeting of the Higher Military Council, which met for four days under the chairmanship of Erdogan.
The army, which considers itself guardian of the country's secular tradition, has sacked dozens of men suspected of harbouring Islamist views in recent years.
The armed forces threatened to intervene over Erdogan's attempt to get Gul into the presidential office earlier this year.