London has received the Olympic flag to signal the start of its reign as Olympic host city and spark wild celebrations in the capital.
Mayor of London Boris Johnson was given the flag by IOC President Jacques Rogge at the closing ceremony in Beijing.
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 at a party in London.
Johnson waved the flag four times, as scripted, 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.
Johnson displayed the flag at a major celebration in Beijing on Sunday for athletes, organisers, senior politicians including Prime Minister Gordon Brown, spectators and the media.
"Sport is coming home. See you in London""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 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!"
At the celebration at London House in Beijing, Johnson told the BBC: "It was a little daunting picking up the flag, but the baton has been passed to a London administration that will deliver.
"This is not going to be a cost-cutting Olympics, but it is essential we watch every penny to deliver a Games that is value for money."
Prime Minister Brown added: "It has been an amazing atmosphere here and in London too.
"You can see how it's going to build to 2012 - nights like this make you proud to be British."
In London thousands of people attended a party in The Mall outside the Queen's residence, Buckingham Palace.
They were entertained by musical acts including McFly, Scouting for Girls, Katherine Jenkins, The Feeling and Will Young.
Several British Olympians, including cycling's triple gold medallist Bradley Wiggins, silver medal winning triple jumper Phillips Idowu and past stars Sharron Davies, Roger Black and Kate Howey were also present.
Wiggins, who won two golds in Beijing to add to his one from Athens, said: "When I left, it was all 'recession, recession, recession' and we've come back to a country overwhelmed by Olympic success.
"There's an overwhelming sense of people being excited by the next Olympics being in London."
Idowu added: "London's going to be crazy. If we have support like this now, it's going to be amazing."
America's swimming sensation Michael Phelps, who won an record eight gold medals in Beijing, also dropped in.
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He said: "This is my first trip to London and I am looking forward to coming back in four years to compete in the London Olympics.
"It's been an amazing few weeks, (winning eight gold medals was) a dream come true."
A spectacular flypast by the Royal Air Force's aerobatics team, the Red Arrows, with their trademark red, white and blue smoke wowed the crowd.
And former M People singer Heather Small rounded off the party with a rendition of her hit single Proud.
Numerous cities, including 2012 football venue Glasgow and sailing venue Weymouth were hooked up to London via giant screens.
The International Olympic Committee awarded the Games of the 30th Olympiad to London on 6 July, 2005.
The city 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.
London will become the first city to stage the Olympics for a third time in 2012.
On both previous occasions, the capital has staged the Games at short notice - Rome pulled out of hosting the 1908 Olympics following the eruption of Mount Vesuvius in 1906.
And in 1948, London staged what became known as the Austerity Games following World War II.
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