Mayor Boris Johnson has received the Olympic flag to signal the start of London's reign as Olympic host city and spark wild celebrations in the capital.
An eight-minute handover presentation, featuring a red double-decker bus, footballer David Beckham and musicians Jimmy Page and Leona Lewis followed.
An estimated 40,000 people celebrated the handover on The Mall at a party.
Johnson was handed the flag by IOC President, Jacques Rogge, in front of a 91,000 people at the Bird's Nest.
The Mayor waved the flag four times, as directed, before handing it to an usher.
He will bring the flag back to London on Tuesday and fly it outside City Hall alongside the Paralympic flag when those Games have concluded in September.
He will also display the flag at a major celebration in Beijing tonight for athletes, organisers, senior politicians including Prime Minister Gordon Brown, spectators and the media.
"I'm profoundly humbled by the immense privilege I've been given today," said Johnson.
"I'm also intensely proud. Proud of the athletes who pulled in the best medal tally for decades. Proud of the people behind them who've delivered this stunning success. And proud beyond all that London is now in charge of the Olympic legacy.
"The next Summer Games return to a country which I frequently boast has either invented or codified just about every major world sport.
"We will draw on that heritage and we will draw on our wit, flair, imagination and ingenuity to build on what we've all witnessed in Beijing and deliver a fantabulous Olympics in what I consider to be not only my home, but the home of sport.
"Sport is coming home. See you in London!"
In London, the party is set to go on until 1700 BST with a variety of musical acts.
They include McFly, Will Young, Scouting for Girls and The Feeling and a flypast by the Royal Air Force's aerobatics team, the Red Arrows, entertaining the crowd.
It will also feature British Olympians including Dame Mary Peters, Roger Black, Sally Gunnell and Sharron Davies.
The International Olympic Committee awarded the Games of the 30th Olympiad to London on 6 July, 2005.
London won a two-way fight with Paris by 54 votes to 50 at the IOC meeting in Singapore, after bids from Moscow, New York and Madrid were eliminated.
Mayor Johnson has told the BBC he is "absolutely determined" the 2012 Olympics will cost less than the current £9.3bn budget.
It will be the first time the Olympics has been held in Britain since 1948.[BBC]