Conceived after terrorists killed 3,000 people on United States' soil on Sept. 11, 2001, it was created to keep Americans safer from terrorist attack.
The department merges 22 federal agencies with 170,000 employees in the largest reorganization of the federal government since the Defense Department was created in 1947.
White House press secretary Ari Fleischer heralded the agency's first day of existence, saying it was "designed to provide greater protections to the American people as we move forward into a different type of 21st century threat."
It will be led by Tom Ridge, the former Pennsylvania governor who on Wednesday received Senate confirmation as secretary of the new department. His position will be 18th in the line of succession for the presidency, ranking after the Veterans Affairs Department secretary, Anthony Principi.
No stranger to the ways of Washington, Ridge nonetheless faces the daunting task of pulling together a massive new agency while defending the nation against terrorism.
Ridge was being sworn in Friday at the White House. His undersecretary will be Asa Hutchinson, head of the Drug Enforcement Administration, who won unanimous Senate approval Thursday. His responsibilities will range from border control to aviation security.
The department will have its own analytical unit to examine intelligence gathered by the CIA, FBI and other agencies to look for clues about terrorist plots. It also will coordinate with 2 million police, firefighters, medical personnel and other first responders around the country.
Congress in November passed legislation to create the department after lengthy debate on such issues as whistle-blower protections, maintaining civil liberties, collective bargaining for department employees and the division of labor with the CIA and FBI, which will remain independent.
For the next five weeks, the department will be in a transitional mode. Many of the agencies being folded into homeland security won't actually fall under its authority until March 1.
With a first-year budget expected at about $33 billion, the department will combine the Secret Service, Coast Guard, Customs Service, Immigration and Naturalization Service, Transportation Security Administration, Federal Emergency Management Agency and other agencies with security-related functions.
The department's headquarters will be at a secure office complex, run by the Navy, in northwest Washington near the vice president's residence at the U.S. Naval Observatory.
Ridge, a decorated Vietnam War veteran, was elected to the House in 1982 from his hometown area of Erie, Pa., and served for 12 years. In 1994, he became Pennsylvania's governor, winning re-election in 1998.
After the Sept. 11 attacks, Ridge resigned as governor to head President Bush's White House Office of Homeland Security.
Ridge becomes the 15th member of Bush's Cabinet, along with the secretaries of the departments of Agriculture, Commerce, Defense, Education, Energy, Health and Human Services, Housing and Urban Development, Interior, Justice, Labor, State, Transportation, Treasury and Veterans Affairs.