The snap strike was called at 3am local time (7pm AEDT) after contract negotiations with the state-run Metropolitan Transportation Authority (MTA) broke down.
The decision has wrought havoc on America's largest mass transit system, which carries around seven million people a day.
A judge has slapped the transit union with a fine of US$1 million (A$3m) for each day the strike continues.
After extending a deadline for talks, Transport Workers Union (TWU) leaders rejected proposed changes to healthcare and pension provisions, extension of retirement age from 55 to 62, and wage rises.
“This is a fight over whether hard work will be rewarded with a decent retirement – over the erosion or eventual elimination of health benefit coverage for working people,” TWU union president Roger Toussaint said.
“And it is a fight over dignity and respect on the job, a concept that is very alien to the MTA,” he added.
However, New York mayor Michael Bloomberg, one of the many forced to walk into Manhattan, called the action “a cowardly attempt by Roger Toussaint and the TWU to bring the city to its knees to create leverage for their own bargaining position.”
“Ambulances can’t get to somebody in need, firetrucks can’t get to a fire quickly, police can’t get there to stop criminal activity, because the roads are so crowded,” he said.
“People are losing their jobs this morning, right away. There are a lot of people that work in industries where, if they can’t get to work or if the customers can’t get there, they don’t get paid.”
Mr Bloomberg was among those seeking the court ruling against the union, which has violated a statewide prohibition on strikes by public workers.
Each of the city’s 33,700 bus and subway employees risk fines amounting to two days’ pay for every day on strike.
But the cost to the city, aside from frayed tempers and exposure to sub-zero temperatures, has been estimated at A$2.2 billion if it lasts a week.
“It doesn’t seem right to tie up the cultural and investment centre of the world,” said Larry Scarinzi, 72, who was waiting for a taxi in Manhattan.
“They’re breaking the law. They’re tearing the heart out of the city.”
For Yvette Vigo, a Citibank employee who waited for a company-run shuttle bus to take her to work, the freezing cold proved a real test.
“I’m not happy about this,” Ms Vigo said.
“It’s too cold to walk this far.”
Taxi drivers appeared to be the only group benefiting from the chaos, with one Wall Street broker saying he had shared a cab with three others, each of whom paid the full fare to get to work.
In a bid to stave off crippling gridlock in downtown Manhattan, police set up checkpoints at bridge and tunnel entrances and turned away vehicles carrying fewer than four people.
Drivers desperate to fill their cars took to inviting strangers to share a ride, while pedestrians headed for Shea Stadium in Queens where authorities set up a makeshift carpool centre.
Some commuters were able to squeeze themselves onto ferries and the few trains and buses that continued to run.
The last time New York's bus and rail services ground to a halt in April 1980, it took 11 days for the dispute to be resolved.