The president rode to the ceremony in a classic Rolls Royce

He won re-election in a landslide victory in October, despite corruption scandals which tarnished his party.

The former leftist union leader has pledged to retain social change at the heart of his mandate, a policy which has kept him high in opinion polls.

In his inauguration address, Mr Lula said boosting the economy and fighting poverty would remain his priority.

"To govern for all is my path, but defending the interest of the poorest is what guides us in this journey," he told Congress.

Progress had been made during his first term in office, but more work was needed, he said.

"(Brazil) is better off in distribution of wealth, in access to education, health and housing. We have done a lot in those areas, but we need to do much more."

He said he would increase economic growth by cutting red tape and increasing spending on infrastructure, as well as providing investment incentives.

After the ceremony, he addressed a crowd of several thousand supporters outside the presidential palace in Brasilia, thanking them for their support.

He also condemned battles a week ago between drug traffickers and police in Rio de Janeiro that left more than 20 people dead.

"This barbarity that happened in Rio de Janeiro can't be treated like common crime, it's terrorism, and must to be dealt with by the strong hand of the Brazilian state," he said.

Tough term

Thousands of supporters, wearing the bright red T-shirts and caps decorated with the single white star of Mr Lula's Workers' Party, turned out to witness the inauguration.

I'm a faithful believer in his commitment to the poor Lula supporter

But the BBC's Tim Hirsch, in Sao Paulo, says the sparse crowds lining the rain swept route were in marked contrast to the euphoric scenes four years ago when Mr Lula became the first working class president to lead Latin America's biggest nation.

The last 18 months of his first term were plagued by a series of corruption scandals which caused the resignation of several key members of his government.

Nevertheless the president succeeded in getting re-elected with more than 60% of the popular vote.

One of his supporters, a former metal worker from Sao Paulo who had made the 560-mile (900km) journey by bus, said the opposition had blocked many of Mr Lula's initiatives to help the poor.

"He's had it tough because he's been governing without support of Congress," 64-year-old Mr Alves told the Associated Press.

"I'm a faithful believer in his commitment to the poor. He is the face of the poor," he added.

Correspondents say the president is likely to continue pursuing market-friendly policies while focusing welfare spending on the poorest of the country.

His "Zero Hunger" programme has been particularly popular.

He has expanded it to reach 11 million families who receive money for food each month in exchange for keeping their children in school.

But, although he has managed to stabilise the country's economy and bolster social spending for the large sector of society living in poverty, Brazil's growth has dragged behind other Latin American countries.