"Welcome to the European Union!" European Commission President Jose Manuel Barroso said to 20,000 cheering people packed into the capital's central Ban Jelacic Square.
At midnight, the recession-plagued country, at the crossroads of Central Europe, the Balkans and the Mediterranean, became the European bloc's 28th member and its first new member since Romania and Bulgaria joined in 2007. Croatia applied for membership 10 years ago.
"This will change the life of this nation for good. I welcome you wholeheartedly," European Council President Herman Van Rompuy said on behalf of the member countries' heads of state and government.
"In the history of a nation, there are a few events such as this one," said President Ivo Josipovic. Joining the EU opens "a new chapter in the thick book of our history."
Thousands of people waved small EU and Croatian flags as "Ode to Joy," the European anthem, celebrating warmth and equality regardless of differences, was sung. Fireworks lit up the sky.
Officials removed customs posts at borders with EU members Slovenia and Hungary, hoisting EU flags and uncovering EU-emblem signs. The country also started flying EU flags and showing EU signs at its border posts with non-EU countries Bosnia-Herzegovina, Serbia and Montenegro.
Croatia will be required to adopt the euro after the nation of 4.5 million people meets the economic criteria, most likely in two or three years, Prime Minister Zoran Milanovic has said.
Despite the official festivities, some Croats in Zagreb, the capital, said they feared their country, which fought a brutal four-year war of independence from Yugoslavia, would surrender its hard-won self-determination and freedoms by becoming part of another union of nations.
"If we spent hundreds of years fighting for independence with Turks and Serbs, I don't understand how we can sell it once again, 20 years after winning sovereignty, to a bigger and more powerful union where we are going to be marginalized," student Doris Vucic, 21, told USA Today.
"It was a stupid move by our people," she said, referring to a January 2012 referendum on EU membership in which 66 percent voted in favor. The state referendum commission put the turnout at about 44 percent of eligible voters.
"I worry about the enormous influence the EU will have on Croatian law and social policies," student Andrej Ivan Nuredinovic, 22, told the newspaper. "Our government is manipulating us to want to join."
Croatia's split from Yugoslavia triggered a 1991-1995 war of independence. It won the war, but much of Croatia was left devastated and cities and towns were in ruin.
Croatia went through years of rebuilding and reform. It reconstructed its economy, made democratic reforms and developed industries, including tourism.
But Croatia's unemployment rate is at 18 percent, with youth unemployment at 52 percent, EU statistics agency Eurostat said.
Croatian economic growth fell 6.5 percent last year, the agency said.
The EU has earmarked more than $18 billion for Croatia between 2014 and 2020, but most of the money must be matched by domestic funds, which many economists say may be hard to do, giving the country's weak economy.
Croatia had to meet tougher criteria than previous applicants, particularly regarding its judicial system, because of worries about corruption and other problems that arose after Romania and Bulgaria joined.
Former Prime Minister Ivo Sanader was convicted in November of corruption, including taking bribes and kickbacks involving $17 million, in the biggest political corruption trial in Croatia's history. He is serving a 10-year prison term.