Several hundred people later formed the Georgian flag in the grounds of a medieval fortress in Gori, which was hit by Russian airstrikes before being occupied by ground forces.
Georgia's government has repeated its assertion that its assault on South Ossetia was a response to a secret Russian invasion.
In an interview with the BBC, Mr Saakashvili said it had been a hard decision to mobilise troops, but that if he had not acted then "we would have had much worse atrocities than had been committed".
He said that now, diplomacy was the only way to "expel Russians" and shift the balance of power in the region.
He also rejected the suggestion that the conflict had damaged Georgia's hopes of joining Nato, saying the US still supported its bid.
Russia has denied it was first to move, and accused the Georgian government of "a pre-planned criminal act".
President Medvedev said in a television interview he had taken the right decisions.
"It was the hardest thing but in the end we got it right," he said.
"The Russian Federation had to respond quickly, thus saving hundreds and thousands of lives and restoring peace in the Caucasus, which was at serious risk."
The conflict erupted on 7 August 2008, as Georgia tried to retake control of South Ossetia, following a series of clashes.
Russian forces quickly repelled the assault, and pushed further into Georgia.
The conflict lasted for five days before a ceasefire was agreed. Russia pulled back, but built up its military presence in both South Ossetia and Abkhazia.
One year on some thousands of people from both sides remain displaced because of the five-day conflict, the human rights group Amnesty International says.
Richard Galpin BBC News, Tskhinvali
Tensions had been rising ever since Mikheil Saakashvili came to power five years ago determined to move Georgia out of the Russian sphere of influence, in particular by applying to join Nato.
Moscow began to pressure the Georgian president through its influence in South Ossetia and the other breakaway Georgian region of Abkhazia, which lies on Russia's southern border.
By the summer of 2008 Mr Sakhashvili was clearly impatient to restore his country's territorial integrity so Russia developed ever-closer relations with the two regions.
The West's decision to recognise the independence of Kosovo early last year may have been a turning point for Moscow, which in response moved as close as possible to recognising South Ossetia and Abkhazia as independent states without explicitly saying so.
Soon after, both Russia and Georgia started preparing for war.
A total of nearly 200,000 were displaced by the fighting, it said.
The report said most of the displaced were ethnic Georgians, many of whom continue to lack basic services and suffer hardship. Of the 38,500 people who fled South Ossetia for Russia, all but 4,000 were thought to have been returned.
But 30,000 of the 138,000 ethnic Georgians who were displaced from South Ossetia are still homeless. Some 18,500, who fled South Ossetia and the district of Akhalgori, face long-term displacement, Amnesty said.
Most have been provided with compensation or temporary accommodation, as well as basic furniture and facilities.
However, their biggest problems remained the remoteness of some of the settlements, which deprived the inhabitants of easy access to hospitals, schools and places of work, Amnesty said. Many people are still dependent on aid.
"An omnipresent sense of tension and insecurity prevent many people from returning to their homes and carrying on with their lives," the human rights group said in a statement.
"Many of the people who have returned are facing a new reality brought about by the conflict, a reality in which they struggle to rebuild their lives and livelihoods," it added.
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