She is the 67th Secretary of State. Hillary replaces Condoleezza Rice of the previous Bush administration.
Speaking on the occasion, Biden said he is confident that with Clinton as Secretary of State, the Obama administration would be able to achieve its foreign policy goals in challenging times.
"In selecting Senator Clinton for this critical task, I think the (US) President selected a person of unrivaled talent and experience," Biden said.
"While serving as the first lady and as US Senator, she's already represented the US in over 80 countries, and is equally at ease in the great diplomatic halls of Europe as she is in small villages in Africa," he said.
"The national security challenge before this administration is great. We are engaged in two wars. We face a continued threat of terrorist attack by al-Qaeda and its allies. We face numerous transnational threats, including the spread of lethal weapons, climate change, disease, and that require common action," the Vice President said.
"To meet these threats, our military might is absolutely necessary. But, to state the obvious, it is not sufficient. We must use the totality of America's strengths, starting with our diplomacy and the ideas and ideals that inform it," Biden said.
Hillary reiterated her use of 'smart power' as a key tool of the US foreign policy under Obama administration.
"We have, in the leadership of President (Barack) Obama, someone who wants us to reach out to the world, to do so without illusions, understanding that the difficulties we face will not be wished away, but meeting them forthrightly and smartly, and that we want to seize the opportunities that exist as well," she said.
"This ceremony takes place at a real hinge of history time, there is so much that lies ahead in terms of challenges, but also opportunities," the former first lady said.
Others present on the occasion were House of Representatives Speaker Nancy Pelosi and the Senate Foreign Relations Committee Chairman John Kerry.
Image: US Secretary of State Hillary Clinton with husband and former US President Bill Clinton, daughter Chelsea and Vice President Joe Biden at the swearing-in ceremony.
Photograph: Jonathan Ernst/REUTERS