The sculpture is inspired by photographs of the civil rights leader outside 10, Downing Street in 1931. A band played Indian classical music, Indian flags adorned the square, and schoolchildren stood in the crowd to watch.
"This statue is a magnificent tribute to one of the most towering figures in the history of world politics and by putting Mahatma Gandhi in this famous square we are giving him an eternal home in our country," Cameron said.
"Many of his teachings remain as potent today as when he first made them. "'The best way to find yourself is to lose yourself in the service of others' and 'be the change that you want to see in the world' remain timeless, profound and inspiring words of wisdom," he added.
Several other notable personalities attended the ceremony, including Chair of the Gandhi Statue Memorial Trust, Meghnad Desai, and Bollywwod superstar Amitabh Bachhan.