The Slovenian was clearly thrown off by her welcome on the steps of The White House as she reached out her hand to greet the former First Lady.
However, instead of taking Mrs Trump’s hand, a dignified Mrs Obama went in for a kiss on the cheek in a warm gesture towards her successor.
Saving face, Mrs Trump put on a brave smile as she quickly returned the affection before handing the former First Lady a giant box from jewellers Tiffany’s.
Despite her grateful welcome of Mrs Trump, the outgoing First Lady swiftly passed the gift to a nearby aide.
CNN • GETTY
Melania Trump was left red-faced after the awkward encounter with Michelle Obama
The gift-giving tradition goes back several administrations , with Mrs Obama giving Laura Bush a leather-bound journal and engraved silver pen when she entered the White House in 2009.
Mrs Trump has already broken with tradition by not moving into the White House straight after her husband’s inauguration due to the First Family's desire to not disrupt their son's education.
The new First Lady is currently living at Trump Tower with Barron, 10, who goes to Columbia Grammar and Preparatory School, however President Donald Trump has vowed the move to Washington will happen “very soon”.
As Mrs Trump will remain in New York, it has fuelled speculation the President’s daughter, Ivanka, might be taking on official duties in her place.
A dignified Mrs Obama went in for a kiss on the cheek in a warm gesture
No challenge can match the fight, and heart and spirit of America
The awkward exchange comes as the billionaire Republican vowed to make America great again in his inauguration speech.
After formally taking office, President Trump declared: “We are transferring power from Washington DC and giving it back to you, the people.
“We the citizens of America are now joined to rebuild this country and restore its promise for all of our people. Together we will determine the course of America and the world for many years to come.
“We will face challenges, we will confront hardships but we will get the job done.
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US President-elect Donald Trump and his wife Melania leave St. John's Episcopal Church on January 20, 2017, before Trump's inauguration.
"No challenge can match the fight, and heart and spirit of America. We will not fail, our country will thrive and prosper again."
And to huge cheers from the thousands of Americans who travelled out to Washington D.C to witness the historical moment, he said: "America will start winning again, winning like never before.
"We will bring back our jobs, we will bring back our borders, we will bring back our wealth and we will bring back our dreams.”
Ahead of the inauguration ceremony, violent protests broke out in the streets of Washington as furious demonstrators clashed with police.