As residents cheered the arriving troops, the city's mayor denounced what he called a crime against culture, saying that Islamists fleeing the French-led offensive had torched a building housing priceless ancient manuscripts.
Financial aid meanwhile was beginning to flow into the troubled region.
On Tuesday, Japan announced it would give an extra $120 million to help stabilise Africa's Sahel region, days after 10 Japanese nationals were killed
in the Algerian hostage siege.
The announcement came just hours before a donor conference for the Mali mission opened at African Union headquarters in Ethiopia.
Already on Monday the International Monetary Fund agreed to provide an $18.4 million emergency loan to Mali.
The recapture of Timbuktu came 18 days after France, with the support of Malian troops, launched an offensive against radical Islamists who seized control of the country's north 10 months ago following a coup in Bamako.
The Islamist fighters, whose move into the government-controlled south sparked the foreign intervention, have retreated in the face of the advance
and retain control over just one stronghold: the town of Kidal in the desert hills of the far north, 1,500 kilometres (932 miles) northeast of the capital Bamako.
Asked if French troops would press on to try to force the Islamists out of the mountainous north of the country, French President Francois Hollande said: "Now the Africans can take over…
"We know that this is the most difficult part because the terrorists are hidden there and can still carry out extremely dangerous operations, for neighbouring countries and Mali," he said from Paris.
Residents of Timbuktu, an ancient city on the edge of the Sahara desert, erupted in joy as French and Malian troops drove in on Monday. "Mali, Mali, Mali," they shouted, as they waved French and Malian flags.
"There were no shots fired, no blood spilt. Not even passive resistance with traps," Colonel Frederic Gout, head of French helicopter operations at the city, told AFP.
Residents said many of the Islamist occupiers had left several days ago, as French air strikes rained down on their bases. The electricity and the phone networks were both out of action.
'A real cultural crime'
As the Franco-Malian force approached the city, however, reports emerged that a building housing tens of thousands of centuries-old Muslim and Greek manuscripts had been set on fire.
Timbuktu mayor Halley Ousmane, speaking from the capital Bamako, confirmed accounts of the fire at the Ahmed Baba Centre for Documentation and Research.
"It's a real cultural crime," he said.
Set up in 1973, the centre housed between 60,000 and 100,000 manuscripts, according to Mali's culture ministry.
Timbuktu was for centuries a cosmopolitan city and a centre of Islamic learning.
Radical Islamists seized it in April 2012 as they took control of Mali's desert north in the chaos that followed a military coup last March.
They forced women in Timbuktu to wear veils, and those judged to have violated their strict version of Islamic law were whipped and stoned. The militants also destroyed ancient Muslim shrines they considered idolatrous.
On Monday however, residents of the city were celebrating their new-found freedom.
Lahlia Garba, a woman in her fifties, expressed relief that the hard-line Islamists had been forced out.
"I had to wear a burqa, gloves and cover everything," she said.
The International Criminal Court's chief prosecutor Fatou Bensouda warned Mali over reports its army had committed abuses.
Rights groups and journalists have reported allegations that Malian troops have executed suspects on the spot in towns recaptured during the offensive.