As John Paul's exhumed casket was on display at an altar in St. Peter's basilica, Benedict read a proclamation of beatification in Latin to more than 1 million faithful in the square, Italy's ANSA news agency reported.
Full sainthood will be bestowed when evidence of a second miracle is corroborated by a Vatican commission.
The first miracle attributed to John Paul was of a nun who dreamed of the late pontiff soon before her incurable Parkinson's disease disappeared. John Paul suffered from the same disease for several years before he died April 2, 2005, at the age of 84.
Benedict referred to John Paul's funeral and why he decided to expedite the path to sainthood.
''On that day we smelled the scent of his saintliness and the people of God have expressed their veneration of him in many ways," Benedict said. ''That's why, while respecting Church rules, I wanted his beatification to proceed with discreet swiftness.''