Thousands of people packed around the national monument, or Monas, in central Jakarta to watch a light show and performances by musicians and entertainers.
President Joko Widodo shot a bow and arrow to set off laser lights and two digital clocks that will count down to the opening ceremony in exactly one year.
Jakarta and Palembang, on the island of Sumatra, will host around 10,000 athletes from 45 countries, competing in 39 sports from August 18 to September 2, 2018.
But questions have been raised about how ready the country will be.
Indonesia has faced a race against time to prepare for the 18th Asian Games after original hosts Vietnam withdrew in 2014 due to financial problems, meaning the country has only had four years to prepare instead of the usual six.
When the Olympic Council of Asia (OCA) visited Indonesia in March, it warned the country it faced huge challenges, raising concerns about a lack of coordination.