"We have a working satellite," the European Space Agency's (ESA) project leader Javier Benedicto said from Russia's Baikonur launch centre in northern Kazakhstan, after the British-built GIOVE-A successfully opened its solar panels and booted onboard computers.
The GIOVE-A blasted off from Kazakhstan on a Russian Soyuz rocket at 0519 GMT on a mission to test equipment, including an atomic clock, in preparation for future phases of the project.
The satellite will help set the stage for a 30-satellite constellation giving mariners, pilots, drivers and others an almost pinpoint-accurate navigational tool.
Next year, a second test satellite will go into space, followed by four working satellites in 2008 and the first commercial use of the system in 2010.
Satellite navigation, originally developed by the US military for targeting and military manoeuvres, has become indispensible for civilians, with uses ranging from letting drivers find their way through unfamiliar cities without a map to keeping track of criminals under home detention.
Pinpoint accuracy
The difference is that Galileo will be even more accurate than the US
Global Positioning System (GPS) and will stay under civilian control, while at the same time increasing the European bloc's strategic independence from the US.
The GPS is run by the US military, meaning that the Pentagon can switch off or interfere with the system without warning civilian users around the world.
In Paris, French President Jacques Chirac voiced "great satisfaction" over the launch of the test satellite, saying that "space is an essential part of the great European project.”
European Union transport commissioner Jacques Barrot said in Brussels that the launch was "proof that Europe can deliver ambitious projects to the benefit of its citizens and companies."
Mission control described the launch as trouble free after the GIOVE-A was successfully placed in orbit 23,000 kilometers (14,000 miles) above Earth.
"In fact, everything happened even better than expected because of a high quality placement in orbit, thanks to the Soyuz rocket," Mr Benedicto said.
"A perfect mission in difficult conditions," said Jean-Yves Le Gall, chief of Arianespace and Starsem, the Russian-European company in charge of Soyuz rocket launch services.
The launch was delayed by two days after ground stations responsible for following the satellite's progress in space found anomalies.
It was the first time that the ESA, which runs the Galileo project's initial phase along with the European Union, had launched a satellite into a medium orbit.
Common operating standards
The US and the EU last year reached an accord to adopt common operating standards for the two systems, overcoming American concerns that the Galileo system will compromise the security of GPS, on which the US military is heavily dependent.
Galileo will also be compatible with the Russian GLONASS network, which is controlled by military operators.
According to the ESA, Galileo is designed to deliver real-time positioning accuracy down to the meter range, which is unprecedented for a publicly available system.
It will guarantee service under all but the most extreme circumstances and will inform users within seconds of a failure of any satellite, which will make it especially valuable where safety is crucial, such as running trains, guiding cars and landing aircraft.
The date for opening the network to commercial use has been pushed back two years to 2010.
Indicating the growing importance of satellite navigation technology,
Russia is in the midst of revamping GLONASS. Three new satellites were launched on Sunday, bringing the total to 17, and President Vladimir Putin has called for a fully working system by 2008.