"I Queen Beatrix... abdicate in favour of my son Willem-Alexander," the act said, as read out before the signing that was broadcast live from the Amsterdam palace.
The queen shed a tear on arrival, and the act was then witnessed by Willem-Alexander, his Argentine-born Queen Maxima and members of the government.
A cry went up from the 25,000 crowd in the Dam, the main square opposite the palace where the signing was shown on giant screens.
"Thank you Bea", they shouted using her affectionate nickname.
The king and queen's three daughters, including their eldest, now Princess of Orange Catharina-Amalia, 9, attended the ceremony, wearing identical yellow and white dresses.
Willem-Alexander, 46, is the first Dutch king since 1890 and the first of a new wave of relatively youthful European monarchs, with future kings and queens, including Britain's Prince Charles, attending.
Amsterdam's population is set to double with at least 800,000 visitors flooding the city's streets and canals as Beatrix, 75, ended her 33-year reign.
Willem-Alexander will now be sworn in rather than crowned at deconsecrated church Nieuwe Kerk, a stone's throw from the palace, before a joint session of the houses of parliament.
A who's who of royals-in-waiting, including Britain's Prince Charles, Spain's Prince Felipe and Japan's Prince Naruhito and his wife, Crown Princess Masako, are attending the ceremony.
Princess Masako is on her first trip abroad in nearly seven years, while Prince Charles also attended Beatrix's enthronement in 1980.
Dam Square, which lies opposite the palace and can hold 25,000 people, was packed with wellwishers early in the day, all hoping to catch a glimpse of King Willem-Alexander and his glamorous Argentine-born Queen Maxima, 41.
Some people spent the night on Amsterdam's main square to ensure having a good view of the royal balcony, while partygoers from across the Netherlands descended on the capital, many carrying Dutch flags.
"We've been here for several hours, we wanted to be sure to have a good place to see them appear on the balcony," said Edith, 22, who sat with two friends on a large piece of cardboard on Dam Square since 5:00 am.
Someone else waved an Argentine flag printed with: "Thank you the Netherlands for loving and trusting Maxima."
Over 10,000 police have been deployed in Amsterdam, and bomb-sniffing dogs carried out last-minute security checks for the expected 25,000 orange-clad crown on Dam Square.
Police said that they had arrested 70 people since Monday.
Authorities have closed off Amsterdam airspace to civilian aircraft for three days and issued strict orders prohibiting the use of drones, with rooftop snipers keeping a watchful eye.
Beatrix, 75, bade farewell to the nation in her role as queen in a televised address to the nation late Monday, before becoming a mere princess again.
"Not power, nor personal will, nor hereditary authority, but only the will to serve the community can give substance to a contemporary monarchy," said an emotional Beatrix.
Willem-Alexander is well-prepared for the task ahead of him and will stand above party and group interests, she said.
The monarchy is popular in the Netherlands, but some question the cost of the royal household and republicans are seeking to get the king's 825,000 euro (million-dollar) tax-free salary reduced.
While her pre-recorded speech was being broadcast, Beatrix attended a sumptuous gala dinner at the city's landmark Rijksmuseum on Monday evening, attended by top royals from around the world.
Queen Maxima wore a Valentino dress to the dinner that she had previously worn in 2008. Dutch media said that this was a deliberate move to reduce the royal family's image of extravagance in times of economic belt-tightening.
While Beatrix was known for her formal court, Willem-Alexander has already said that he will not be a "protocol fetishist".
Beatrix's enthronement in 1980 was marred by violent protests and running street battles over a housing crisis that left the city looking like a war zone.
Anti-royalists this time have been allotted six locations in Amsterdam to stage protests. But only one has been booked by Republicans planning playful protests, including by wearing white.
Preparations for the day have been overshadowed by a rancorous debate about the event's official song, known as the Koningslied, which many considered ill-fitting, with its mix of traditional and rap music.
The nation will now sing the Koningslied as one on Tuesday evening, just before the royal family heads off on a water pageant behind Amsterdam's central train station.
Maxima is largely responsible for having made her husband popular after an allegedly boozy youth which earned him the nickname "Prince Pils".
Ever smiling, she has mastered the Dutch language and even taken a charity swim in Amsterdam's canals, endearing herself further in a country that expects their royals to be at once normal and regal.
Speaking ahead of the enthronement, Willem-Alexander said that "people can address me as they wish because then they can feel comfortable."
He stressed he wanted to "be a king that can bring society together, representative and encouraging in the 21st century".