Vazquez took the oath of office in the National Assembly before a crowd that included Brazilian President Dilma Rousseff, Cuban President Raul Castro and other regional leaders.
He then headed to a ceremony at Independence Square in the capital Montevideo to receive the presidential sash from fellow leftist Jose "Pepe" Mujica, sealing their Broad Front (FA) party's hold on power for another five years in this country that bars presidents from serving consecutive terms.
The ceremony draws a curtain on former guerrilla fighter Mujica's colorful rule.
Vazquez, 75, has a more buttoned-down style and has criticized some of Mujica's reforms, including the still-unimplemented plan to sell marijuana at pharmacies.
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He inherits a country facing a tougher economic climate than when he first took office in 2005.
Uruguay has enjoyed 12 years of unbroken growth and record-low unemployment, but is now struggling to deal with the end of the global commodities boom.