Many are looking now to see whether Morsi will try to take on the military and wrestle back the powers they took from his office just one week ago. Thousands vowed to remain in Tahrir to demand that the ruling generals reverse their decision.
In his first televised speech, the 60-year old U.S.-trained engineer called on Egyptians to unite and tried to reassure minority Christians, who mostly backed Morsi's rival Ahmed Shafiq because they feared Islamic rule.
He said he carries "a message of peace" to the world and pledged to preserve Egypt's international accords, a reference to the peace deal with Israel.
Israeli Prime Minister Benjamin Netanyahu said he, too, hopes peace with Egypt will remain intact.
"Israel expects to continue cooperation with the Egyptian government on the basis of the peace agreement between the two countries," Netanyahu said in a statement Sunday.
Morsi also paid tribute to nearly 900 protesters killed in last year's uprising.
"I wouldn't have been here between your hands as the first elected president without . . . the blood, the tears, and sacrifices of the martyrs," he said.
In the lengthy and redundant speech, Morsi appeared to be struggling to compose his sentences. Wearing a blue suit and tie, he looked stiff and uncomfortable and did not smile throughout as he read from a paper. He was non-confrontational and did not mention the last-minute power grab by the ruling military, instead praising the armed forces.
The White House congratulated Morsi and urged him to advance national unity as he forms a new government. White House press secretary Jay Carney called Morsi's victory a milestone in Egypt's transition to democracy after decades of authoritarian rule under Mubarak. The Obama administration had expressed no public preference in the presidential race.
Left on the sidelines of the political drama are the liberal and secular youth groups that drove the uprising against Mubarak, left to wonder whether Egypt has taken a step towards becoming an Islamist state. Some grudgingly supported Morsi in the face of Shafiq, who was Mubarak's last prime minister, while others boycotted the vote.
Morsi will now have to reassure them that he represents the whole country, not just Islamists, and will face enormous challenges after security and the economy badly deteriorated in the transition period.
Pro-democracy leader Mohammed ElBaradei urged unity after the results were announced.
"It is time we work all as Egyptians as part of a national consensus to build Egypt that is based on freedom and social justice," he wrote on his Twitter account.
The elections left the nation deeply polarized with one side backing Shafiq, who promised to provide stability and prevent Egypt from becoming a theocracy. Because of his military career, many saw him as the military's preferred candidate.
In the other camp are those eager for democratic change and backers of Morsi's Muslim Brotherhood who were persecuted, jailed, and banned under Mubarak but now find themselves one of the two most powerful groups in Egypt.
The other power center is the ruling military council that took power after the uprising and is headed by Mubarak's defense minister of 20 years.
Just one week ago, at the moment polls were closing in the presidential runoff, the Supreme Council of the Armed Forces (SCAF) issued constitutional amendments that stripped the president's office of most of its major powers. The ruling generals made themselves the final arbiters over the most pressing issues still complicating the transition - such as writing the constitution, legislating, passing the state budget - and granted military police broad powers to detain civilians.
Also, a few days before that constitutional declaration, a court dissolved the freely elected parliament, which is dominated by the Muslim Brotherhood, leaving the military now in charge of legislating.
Brotherhood members and experts said the results were used as a bargaining chip between the generals and the Brotherhood over the parameters of what appears to be a new power-sharing agreement. The country's new constitution is not written and the authorities of the president are not clear.
This is the first time modern Egypt will be headed by an Islamist and by a freely elected civilian. The country's previous four presidents over the last six decades have all came from the ranks of the military.
"Congratulations because this means the end of the Mubarak state," said Shady el-Ghazali Harb, a prominent activist who was among the leaders of the protests in January and February last year.
The results of the elections were delayed for four days amid accusations of manipulation and foul play by both sides, raising political tensions in Egypt to a fever pitch.
The delay plunged the country into nerve-wrecking anticipation and pushed tensions to a fever pitch. Parallel mass rallies by Shafiq and Morsi supporters were held in different parts of Cairo and cut-throat media attacks by supporters of both swarmed TV shows. In the hours before the announcement of the winner, the fear of new violence was palpable.
Heavy security was deployed around the country, especially outside state institutions, in anticipation of possible violence.
Morsi narrowly defeated Shafiq with 51.7 percent of the vote versus 48.3, by a margin of only 800,000 votes, the election commission said. Turnout was 51 percent.