Harold Washington was inaugurated as the first black mayor of Chicago today, and as thousands of supporters from his extraordinary "people's campaign" cheered lustily he pledged anew to break the power of the Democratic machine that has run the city for the last half century.

In a blunt, 15-minute address from a podium jammed with hundreds of Illinois political leaders, Washington vowed an end to political "business as usual," saying it is not acceptable to "this city, and this chief executive." In a ceremony of pomp and dignity, he blamed outgoing mayor Jane M. Byrne for concealing a huge city deficit, which he said could be double an earlier estimate of about $200 million.

And he vowed to fire hundreds of new city employes that she hired in the waning days of her administration. He promised an immediate freeze on all municipal hiring and raises, and said executive salaries will be reduced sharply as part of a package of economy moves.

With Byrne and dozens of the old-line white aldermen and committeemen who oppose Washington's changes staring stonily out at the audience at the Navy Pier Auditorium, he assailed the old order and called for Chicago's 3.2 million residents to "help me institute reform and bring about renewal of this city while we still have the time."

Washington, 61, who faces entrenched opposition in the City Council with crucial reorganization battles looming next week, aimed his remarks past his foes to an activist constituency that first brought him his long-shot primary victory last February, then carried him to triumph in the April 12 election over Republican Bernard E. Epton.

The inaugural of the 42nd mayor in Chicago's 150 years bore the stamp of a man who describes himself as a people's reformer.

More than 2,500 were invited, a dramatic departure from the usual swearing-in ceremonies at City Hall with little space for the public. Reflecting the intense interest in the mayoral drama that gripped Chicago for months, the ceremonies were covered live by the major television and radio stations and a throng of broadcast and print reporters clustered in the galleries.

The hall, a semicircular structure with steel latticework arching over a space about the size of half a football field, is at the far end of a nearly mile-long pier built on the Lake Michigan shore in the 1920s.

Washington's choice of the pier as his inaugural site had a certain symbolism. It was the Rev. Jesse Jackson's successful protest boycott by blacks of a pier festival last summer that demonstrated the rising clout of Chicago's black community.

Washington, a two-term congressman and veteran state legislator from the black South Side, became interested in running for mayor when the boycott was followed by a massive black voter registration drive. He aimed his campaign largely at blacks, white independents and reformers, and Hispanics--all groups shut out by Chicago's longtime boss, the late Richard J. Daley, and his heirs, Byrne and former Mayor Michael Bilandic.

His inaugural speech indicated that the new mayor is turning again to this constituency.

"My election was the result of the greatest grass-roots effort in the history of Chicago," he said as the hall erupted in clapping and cheers. "My election was made possible by thousands and thousands of people who demanded that the burdens of mismanagement, unfairness and inequity be lifted so that the city can be saved.

"One of the ideas that held us all together said that neighborhood involvement has to take the place of the machine. City government must be equitable and fair."

On the podium with Washington and his fiancee, Mary Smith, were the political elite of city and state.

Gov. James R. Thompson headed a delegation of state officials, Cardinal Joseph Bernardin and other prominent city clergymen offered prayers, the berobed justices of the Illinois Supreme Court helped swear in newly elected officials. A group of congressmen led by Sen. Allan J. Dixon (D-Ill.), the 50 aldermen of the City Council and their spouses and dozens of other dignitaries filled out the glittering hierarchy.

As Washington, in a dark suit, white shirt and conservative tie, walked in, the Morris Ellis orchestra struck up the Colonel Bogey March and Byrne led the auditorium in a standing ovation. There was music by the red-jacketed Chicago Children's Choir, an interracial group, and author Studs Terkel, attired in blue blazer, pink shirt, red tie and red socks, read from Carl Sandberg's "The People, Yes!" a paean to the Windy City.

But what Washington told them was unsettling. The city likely is $150 million short in general funds, the schools are $200 million in the hole, twice as deep as earlier estimates, and the transit system "faces a $200 million deficit and no internal solution is possible."

Adding to the complications, he said, was the Byrne job handout: "Hundreds of new city jobs were passed out and hundreds of other jobs reassigned . . . . We will have no choice but to release the several hundred new city employes who were added because of political considerations."