(Recasts with quotes from inaugural speech)

By Ari Rabinovitch

JERUSALEM, July 15 (Reuters) - Nobel peace laureate Shimon Peres was sworn in as Israel's president on Sunday and pledged to seize the opportunity to encourage long-delayed efforts to achieve a diplomatic resolution to conflict in the Middle East.

A former prime minister and Israel's eldest statesman, Peres, 83 was elected by parliament a month ago to the highly prestigious post. Though the job is largely ceremonial, past presidents have had substantial influence in Israeli politics.

"When the opportunity for peace is created, it must not be missed," Peres said in his inaugural speech to parliament, after taking the oath of office, in a ceremony interrupted briefly by the wails of his infant great-grandson, at which he smiled.

It is a president's duty to "encourage peace processes at home, with our neighbours and the entire region," Peres added in his remarks to a house packed with Israeli well-wishers and dignitaries.

Peres won a Nobel prize along with the late Yitzhak Rabin and Yasser Arafat for a 1993 interim peace deal, Israel's first with the Palestinians, that led to the establishment of limited Palestinian self-rule in Gaza and the occupied West Bank.

As head of state, Peres will have the critical job of granting pardons or commuting sentences for prisoners in Israeli jails, including dozens of Palestinian inmates Israel has pledged to release in a boost to President Mahmoud Abbas.

Peres replaces Moshe Katzav, who resigned from the presidency last month after admitting in a plea bargain for a dropped rape charge to committing sex crimes against a woman employee and sexually harassing another.

Born in Poland, Peres immigrated before Israel achieved statehood and rose through the ranks of the leftist Labour party as an ally of the country's first prime minister, David Ben-Gurion.

As deputy defence minister in the late 1950s Peres secured a secret deal with France to launch an Israeli nuclear programme that the Jewish state has reportedly used to produce atomic weapons, though Israel does not comment on this.

Peres served as prime minister from 1984 to 1986 then again in 1995 after Rabin's assassination, though he never won an Israeli election for the position decisively.

He left Labour in 2005 to help found the centrist Kadima party alongside Prime Minister Ehud Olmert and Ariel Sharon, the former prime minister who has been in a coma since suffering a stroke the following year.

Peres, Israel's ninth head of state, had to step down as Olmert's deputy in order to become president, and resign as parliament's longest-serving member of 48 years.

While the presidency does not entail any direct involvement in policymaking, Israeli presidents traditionally speak out on key issues, often influencing political decisions. The president also meets world leaders.

(Additional reporting by Ori Lewis in Jerusalem)

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