Park Geun-Hye was sworn in as South Korea's first female president Monday, vowing zero tolerance with provocation from North Korea and demanding Pyongyang "abandon its nuclear ambitions" immediately.

As leader of Asia's fourth-largest economy, Park, the 61-year-old daughter of a military strongman, faces challenges including slowing growth and soaring welfare costs in one of the world's most rapidly ageing societies.

Taking the oath of office before 70,000 people in front of the National Assembly building in Seoul, Park called on North Korea to "abandon its nuclear ambitions without delay" and rejoin the international community.

The North carried out its third nuclear test earlier this month, triggering global condemnation and the threat of toughened sanctions from the UN Security Council.

"North Korea's recent nuclear test is a challenge to the survival and future of the Korean people, and there should be no mistake that the biggest victim will be none other than North Korea itself," she said.

"I will not tolerate any action that threatens the lives of our people and the security of our nation," Park said, while promising to pursue the trust-building policy with Pyongyang that she had promised in her campaign.

"I will move forward step by step on the basis of credible deterrence," she added.

Observers say her options will be limited by the international outcry over the North's February 12 nuclear test, which has emboldened the hawks in her ruling conservative party who oppose closer engagement.

Monday's two-and-a-half hour inauguration ceremony, held on a chilly and cloudy morning, included a 21-gun salute. As part of the warm-up act before Park arrived, Korean rapper Psy performed his global hit "Gangnam Style".

Park took office a little more than 50 years after her father, South Korea's late dictator and vehement anti-communist Park Chung-Hee, seized power in a military coup.

He went on to rule the country with an iron fist for the next 18 years until his eventual assassination, and remains a divisive figure -- credited with dragging the country out of poverty but reviled for his regime's human rights abuses.

The bulk of Park's inauguration speech focused on the economy, and included commitments to job creation, expanded welfare and "economic democratisation" at a time of growing concern with income and wealth disparity.

South Korea's extraordinary economic revival from the rubble of the 1950-53 Korean War -- known as the "Miracle on the Han" -- has faltered in recent years, with key export markets hit by the global downturn.

Promising "another miracle", Park said her administration would build a new "creative economy" that would move beyond the country's traditional manufacturing base.

"At the very heart of a creative economy lie science and technology and the IT industry, areas that I have earmarked as key priorities," she said.

In a clear warning to the giant, family-run conglomerates, or "chaebols", that dominate the national economy, Park promised a more level playing field and a "fair market" where small and medium-sized businesses could flourish.

"By rooting out various unfair practices and rectifying the misguided habits of the past which have frustrated small business owners... we will provide active support to ensure that everyone can live up to their fullest potential," she said.

Chaebols such as Samsung and Hyundai were the original drivers of the nation's industrialisation and economic growth, but have been criticised as corporate bullies who muscle out smaller firms and smother innovation.

South Korea's journey from war-torn poverty to economic prosperity has done little to break the male stranglehold on political and commercial power in what in many ways remains a very conservative nation.

As South Korea's first female president, Park leads a country that is ranked below the likes of Suriname and the United Arab Emirates in gender equality.