Iranian television footage showed engineers loading the Bushehr plant, whose nuclear fuel is provided by Russia, which also will take away the nuclear waste, the BBC reported.
The plant should begin producing electricity within a month, experts say.
"Despite all pressure, sanctions and hardships imposed by western nations, we are now witnessing the start-up of the largest symbol of Iran's peaceful nuclear activities," Iranian nuclear chief Ali Akbar Salehi told reporters.
Russia said the plant will not be used to help Iran build a nuclear bomb. Iran says it wants to enrich nuclear fuel only for peaceful purposes.
At a news conference, Sergei Kiriyenko, Russian state nuclear corporation chief, hailed the new plant.
"The construction of the nuclear plant at Bushehr is a clear example showing that any country, if it abides by existing international legislation and provides effective, open interaction with the IAEA (the International Atomic Energy Agency), should have the opportunity to access the peaceful use of the atom," Kiriyenko said.
The spent fuel could be used to make weapons-grade plutonium, experts told The Daily Telegraph.
But they noted the uranium fuel the plant will use is below enrichment levels needed to make a nuclear bomb. Weapons-grade uranium must be enriched more than 90 percent, while the uranium at Bushehr is enriched by 3.5 percent.