Work is about "dignity" and "respect", he said, praising the ethic of hard-working Americans.

"We owe them the chance to go to work each day knowing they have the thanks of a grateful nation," he added.

Legendary singer Bruce Springsteen opened the star-studded event with his song "The Rising."

After that, heavy-hitters from Mary J. Blige to Tom Hanks took the stage.

Comedians and actors such as Steve Carell and Jamie Foxx brought some comic levity to the inauguration of a president who will face some serious problems in just a few days.

Joined by his wife Michelle and their children, the president-elect stood up, laughing and clapping.

Beyonce, John Legend, James Taylor and U2 also performed.

During U2's performance of "Pride (In the Name of Love)," a tribute to Martin Luther King Jr., frontman Bono referenced the civil rights leader's "I Have a Dream" speech, saying that it was also "an Irish dream, a European dream, and African dream, an Israeli dream, and a Palestinian dream."

Garth Brooks sang the 1971 folk rock classic "American Pie", followed by a choir-backed version of "We shall be free."

Obama spent the morning visiting the Arlington National Cemetery and attending church before heading to the "We are One: Opening Inaugural Celebration" at the Lincoln Memorial.

The concert is the first of some 100 events in Washington between Sunday and Wednesday that include receptions, balls, parades, exhibitions and speeches, to celebrate Obama's inauguration as the country's 44th and first African-American president.

The celebrations are expected to culminate on Jan. 20 when Obama will be sworn into office.

Crowds gather on the Mall looking toward the Washington Monument for the 'We Are One' Inaugural Celebration at the Lincoln Memorial in Washington D.C. January 18, 2009. [Xinhua/Reuters]