Putin's hand-picked successor was inaugurated on May 7, 2008, and the former president became prime minister a day later, with the pair pledging to run the country in "tandem."
After a momentous 12 months, including a war with the former Soviet republic of Georgia, a global financial crisis that hit Russia's currency and economy hard, and the election of a new U.S. president, who is really at the helm remains a subject for heated debate.
There have been few signs of discord between the two, despite a series of unexpected events, the first of which was the five-day war with Georgia last August in which Russia sent troops to repel Tbilisi's offensive against South Ossetia.
Russia's subsequent recognition of South Ossetia and Abkhazia, another former Georgian republic, as independent was condemned by the West and led to a suspension of ties with NATO and plunged relations with the United States to new post-Cold War low.
"The military conflict with Georgia has influenced our foreign policy a great deal," presidential press secretary Natalya Timakova told reporters on Wednesday.
However, relations with the United States have generally improved since President Barack Obama took office in January, with the two countries' top diplomats symbolically pressing a "reset" button for their bilateral ties.
Medvedev met with Obama in London in April ahead of a G20 summit - which detailed commitments to strengthen the financial system and vowed an extra $1.1 trillion to support jobs and growth across the world - pledging to "chart a fresh start" in relations.
Timakova said the president would make consolidating Russia's resurgence on the world stage a foreign policy priority.
Domestically, Medvedev and Putin had to deal with a financial crisis that originated in the U.S. and has now evolved into a profound recession. Following almost a decade of economic boom mainly driven by high oil prices, Russia is facing rising unemployment, which has swollen to 2.26 million according to official statistics, and a budget deficit of 7.4% of GDP this year.
The government has earmarked 3 trillion rubles (about $92 billion) to rescue the economy since acknowledging the domestic crisis in November. Russia will use reserve funds to cover the deficit this year and could resort to its first foreign borrowing in a decade next year.
As part of efforts to fight corruption, which Medvedev described in his inaugural speech as a key threat hampering growth and endangering society, the president has signed a package of bills, including to protect small businesses from arbitrary inspections by officials that are often an excuse to extort bribes. And he posted his family's incomes in the Internet setting an example of transparency.
He also announced in April a formal end to the antiterrorism campaign in Chechnya, launched in 1999 in Putin's first stint as prime minister, allowing for the pullout of 20,000 troops and lifting restrictions on international flights. Some experts have questioned the move as premature, with militants continuing to attack troops and local officials in the North Caucasus republic.
Medvedev, who said he uses the Internet extensively and believes it to be the best possible platform for public debate, has launched his live blog on the LiveJournal.com website, Russia's most popular blogging site. It runs in tandem with his web blog on the Kremlin site and has of today over 20,000 registered visitors.
A 43-year-old lawyer, Medvedev is seen at home and abroad as a more liberal leader in contrast to former spy Putin, 53, who was criticized in the West for backtracking on democratic reform.
Foreign experts, however, have criticized the president for failing to curb attacks on journalists, to ensure free speech and to release former Yukos founder Mikhail Khodorkovsky, jailed under his predecessor for what many believe were political reasons and now on trial on new charges.
As the second year of the Medvedev-Putin partnership begins, observers hoping to discern who holds the reins of power in Russia are looking first to the Russia-U.S. summit set for July, when Medvedev and Obama will tackle nuclear arms control and other sensitive issues.
