Before the raising of the flags, the ceremony was briefly addressed by Croatian Parliament President Josip Leko and European Parliament President Martin Schulz.
A Croatian Navy choir performed the Croatian national anthem "Our Beautiful Homeland" and the EU anthem, Beethoven's "Ode to Joy", after which the plenary session began.
"This is a historic day for Croatia, a day of joy which the whole of Europe is sharing with Croatia. It is especially nice to share this joy in Zagreb with Croatian citizens and here in Strasbourg, the headquarters of the European Parliament, a city which symbolises reconciliation and an open and united Europe," Leko said.
He said this act of celebration meant that Croatia had reclaimed its position within the European family, having travelled a long and demanding journey of transformation and reform.
"The EU is not just the act of political leaders but of European citizens too, and as of today we Croats too assume part of the responsibility for the Union, whose achievements we have to keep and develop," Leko said, giving Schulz the Croatian flag.
Schulz said Croatia's accession was a message to those who thought that the EU and European integration were over.
That's wrong. The idea that countries and peoples cooperate across borders in joint institutions, knowing that together we are stronger, is alive and indisputable. This moment shows that it is alive, he said, adding that cooperation was the best guarantee of peace and prosperity.
In attendance at the flag-hoisting were a Croatian parliamentary delegation, European Commission President Jose Manuel Barroso, a number of commissioners, the newly elected Croatian members of the European Parliament and many MEPs.
At the beginning of the plenary session, Schulz shook the hand of every Croatian MEP and posed for pictures with them.
Twelve Croatian lawmakers formally took up their duties as members of the European Parliament. They are: Tonino Picula, Oleg Valjalo, Biljana Borzan, Sandra Petrovic Jakovina and Marino Baldini of the ruling Social Democratic Party (SDP), who will join the Socialists and Democrats group in the European Parliament; Davor Stier, Andrej Plenkovic, Ivana Maletic, Dubravka Suica and Zdravka Busic of the Croatian Democratic Union (HDZ), who will join the European People's Party group; Ruza Tomasic of the Dr Ante Starcevic Croatian Party of Rights (HSP AS), who will join the European Conservatives and Reformists group; and Nikola Vuljanic of the Labour Party, who will join the European United Left/Nordic Green Left group.
Croatia held its first EP election on April 14.