At 7:50am (1250 GMT), the Chinese container ship "Cosco Shipping Panama" entered the Agua Clara lock on the Atlantic to begin the first crossing of the roughly 50-mile-long (80.45-km-long) waterway and was due to emerge on the Pacific side by 5pm (2200 GMT).
The expansion, which triples the size of ships that can travel the canal, allows the country to host 98 percent of the world's shipping and is aimed at wresting market share from rival Suez and US land routes made cheaper by low oil prices.
By 2021, the Panama Canal Authority (ACP) is hoping the project will bring in $2.1 billion per year in added revenue, representing 2.8 percent of gross domestic product.
"As a Panamanian, I am proud," said Odalis Castillo, an 18-year-old student who attended the launch. "There will be more money to spend on social projects."
It also faces challenges like the supply of fresh water needed to move the giant locks and safe handling of the huge ships.
So far 170 ships have signed up to use the canal in the next three months. If the industry perks up, the ACP already has a $17 billion plan for a fourth set of locks to lure even bigger ships that can now only travel through the Suez Canal.
Analysts said the rank of those leading the delegations was affected by the Panama Papers scandal, in which millions of documents were leaked from law firm Mossack Fonseca, revealing how some of the world's richest people use offshore companies to avoid tax and launder money.
Jill Biden, the wife of US Vice-President Joe Biden, led the delegation from the United States, which finished building the canal in 1914, controlled it until 1999 and is still its biggest user.