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The government's decision to reinstate Chaudhry in order to defuse a debilitating crisis has been celebrated on the streets, and supporters carrying balloons and led by bagpipe players headed to celebrate outside his house.
The Supreme Court said Chaudhry resumed the office after midnight, a move which could draw a line under more than a year of political turmoil that helped end the tenure of previous president Pervez Musharraf.
The chief justice immediately began work, approving the court roster for the coming week and assigning different benches to hear pending cases in a judicial system facing a massive backlog.
Chaudhry and 60 other top judges were sacked in 2007 by Musharraf, who feared the supreme court would disqualify him from contesting a presidential election while remaining head of the military.
In a dramatic climbdown, following months of broken promises and years of protests from lawyers, Prime Minister Yousuf Raza Gilani announced Monday that the government had decided to reinstate the deposed chief justice.
It was a move calculated to end political turmoil after a three-week showdown between opposition leader Nawaz Sharif, who was demanding Chaudhry's reinstatement, and Musharrafs unpopular successor, President Asif Ali Zardari.
Gilani made the announcement on television at dawn after a government crackdown failed to thwart opposition activists and lawyers from heading towards the capital Islamabad as part of a mass 'long march' protest.
The pledge to reinstate Chaudhry defused a crisis that had pushed the nuclear-armed Muslim nation to the brink of chaos.
Jubilant lawyers and members of civil society began gathering outside his official residence to celebrate Chaudhry's return, carrying coloured balloons and placards as they marched towards the sprawling villa in the capital.
A symbolic raising of the Pakistani flag was to be held at his residence to fulfil the pledge made by opposition leader Benazir Bhutto, who vowed before her 2007 assassination that the flag would one day be raised at his home.
Millions of Pakistanis have pinned great hopes that his return will cleanse the judiciary of rampant corruption and clear the backlog.
Chaudhry, who shies away from the media and refuses to make political statements, has a reputation as an upstanding, independent-minded judge -- qualities that experts say will set the tone for a cleaner judiciary.
Analysts point to what they say is an impressive set of credentials.
He blocked a deal to privatise steel mills, which would have earned the government millions of dollars, by pointing out irregularities.
He took up the cases of missing people, allegedly held by Pakistani security forces or handed over to the United States on terror charges.
And he also questioned Musharraf's eligibility to contest the presidential election -- a stand that first cost him his job.
But while legal experts say his restoration is an important principle, they warn he faces huge challenges to end corruption and secure reforms from the government.
Gilani was set Sunday to hold his first face to face talks with Sharif since the Supreme Court on February 25 disqualified the opposition leader and his brother Shahbaz from contesting elections, sparking the latest crisis.
The government filed appeals last week to overturn the court ruling and the meeting at Sharifs country estate in Punjab, the countrys political heartland, is widely seen as a further move towards reconciliation.
