In a visibly moving moment for both, Mr Macron accompanied Mr Hollande to his auto, shaking hands and applauding him along with the employees of the French presidency who gathered in the palace's courtyard.
He promised that the European Union, hit by the imminent departure of Britain, would be "rejuvenated and relaunched" during his time in office.
Hollande's five years in power were plagued by a sluggish economy and bloody terror attacks that killed more than 230 people.
Just a week since he beat his far-right rival Le Pen in the presidential vote, Macron has inherited an extraordinary to-do list and some demanding deadlines.
His Republic on the Move movement - barely a year old - is hoping to elect a majority of lawmakers in next month's parliamentary elections so that he can pass his programs.
Fifteen hundred police were mobilised to ensure security for Macron's inauguration while a large section of Paris was closed to traffic all morning.
Emmanuel Macron was sworn in as French president Sunday following his landslide victory a week ago, in which he vowed to unite a country with deepening divisions.
"The divisions and fractures that run through our society must be overcome, whether they be economic, social, political or moral".
"The world and Europe need more than ever France, and a strong France, which speaks out loudly for freedom and solidarity".
After arriving at the Champs Elysees with his wife and meeting with Francois Hollamnde for about an hour, Macron was presented with the Chain of Office, - "grand collier de la Légion d'honneur" - a necklace owned by Napoleon I, and a symbol of his position as Grand Master of the Legion of Honour. The pair met in the president's office to discuss issues of national security, including the country's nuclear codes. He was helped both by Hollande's decision not to stand for a second term and by a corruption scandal that engulfed Macron's most formidable opponent, François Fillon, a former prime minister, whose hiring of his wife and children to work for him led to an embezzlement investigation. I know that the French expect much from me.
Monday was a French national holiday marking decades of peace in Western Europe, something Macron made a cornerstone of his campaign against Le Pen's brand of nationalist populism. And of course "re-naissance".
Republicans secretary general Bernard Accoyer said the move had created "ambiguity" over what political line Mr Philippe would follow.
The official result of the vote was proclaimed in a ceremony Sunday at the Elysee presidential palace in Paris by the president of the Constitutional Council, Laurent Fabius.
The timing of France's youthful new leader is good - the economy, in the doldrums for years, is beginning to show signs of recovery. Success - if it comes at all - may only be appreciated years later.
Mr Philippe's appointment ticks several boxes for 39-year-old Mr Macron, France's youngest president, who took power on Sunday.
Macron has promised to reinvigorate French politics by bringing in new faces, and will form a government in the coming days.
Shortly after the announcement, Macron was to travel to Berlin on his first foreign trip as French leader. To strengthen the relations with the UE, he will hold a meeting this Monday with Angela Merkel in Berlin to talk about immigration, financial matters and the future of the organization. "Don't give full powers to Mr. Macron and his prime minister".
France's place is in the European Union "which protects us and enables us to project our values in the world", Macron said on Sunday, but the club needed to be "reformed and relaunched".
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