Crown Prince Sheikh Hamdan bin Mohammed bin Rashid al-Maktoum attended the opening of the ultra-modern, air-conditioned tram in the emirate where summer temperatures rise to 50 degrees Celsius.
Opening of the 10-kilometre light rail system was delayed for three years due to linked to the 2008 global financial crisis.
Fireworks lit up the sky today across large areas of the luxurious Dubai Marina as well as other business and tourist neighbourhoods which will be connected by the new rail system.
Construction of phase two is expected to begin in 2015, extending the tram line to other neighbourhoods.
Dubai, which has established itself as a regional business centre and tourist destination, has enormous investments in infrastructure as it prepares to host the 2020 World Expo.
The city, home to over two million inhabitants, inaugurated its metro rail network in September 2009.