Brown, currently serving a second stint as Governor, first served two terms from 1975 to 1983 and then returned to the Governorship in 2011. He easily defeated Republican challenger Neel Kashkari to win re-election in November.
Brown, the 76-year-old son of the late California Governor Edmund G "Pat" Brown, has forcefully steered the heavily Democratic state on a centrist path since voters returned him to the governorship.
"We are at a crossroads," Brown said in his inaugural address. "With big and important new programs now launched and the budget carefully balanced, the challenge is to build for the future, not steal from it, to live within our means and to keep California ever golden and creative, as our forebears have shown and our descendents would expect."
California faced a budget deficit of $26 billion when Brown was elected in 2010, following a national recession that hit the state's economy hard and came after years of fiscal woes in California. He enters his fourth term with a balanced budget.
In November, California residents voted to enshrine a rainy-day fund in the state's constitution, a plan backed by Brown that aims to ensure the state's financial stability after years of boom-and-bust budgets.
This year, California will set aside $2.8 billion in the fund, Brown said during his speech, to applause from lawmakers.
Brown also pledged to improve the state's environment for the next 15 years by cutting petroleum use and increasing electricity derived from renewable sources to 50 per cent.
Assembly Republican leader Kristin Olsen said the Governor has failed to present a comprehensive plan for job growth and education, and she expressed doubts about a project to build the nation's first high-speed rail line in California.
A groundbreaking ceremony is planned for today, and Republicans have derided the project, which is estimated to eventually cost $68 billion.
"While Governor Brown is still off chasing trains, we still have real needs in California," Olsen said.