The railway will "carry Chinese goods to Europe in just 12 to 15 days", said the Turkish president Recep Tayyip Erdogan, who also attended the ceremony with the Georgian prime minister Giorgi Kvirikashvili, Kazakh prime minister Bakytzhan Sagintayev and Uzbek premier Abdullah Aripov.
While the line offers a shorter route for transporting Chinese goods to Europe by rail, "the competition is really tough", said Akif Mustafayev, the permanent representative in Azerbaijan of the intergovernmental commission of Traceca, an EU-backed transport programme.
The 849 km BTK programme is central to plans to create a rail corridor from the Caspian Sea to Europe via Turkey.
A railway connecting Gyumri, Armenia, and Kars in Turkey is another victim of the long freeze in Turkish-Armenian ties.
The leaders of Azerbaijan, Turkey and Georgia launched an 826-km (500-mile) rail link connecting the three countries on Monday, establishing a freight and passenger link between Europe and China that bypasses Russian Federation.
The new Baku-Tbilisi-Kars railway (BTK) promises to provide an economic boost to the region.
The Republic of Azerbaijan, located at the strategic crossroads of Europe and Asia and nearby sizeable markets such as Turkey, China, Iran and Russian Federation, is poised to become the top choice for foreign investors aiming to expand their business in the region.
The agreement for the construction of the BTK was signed in Tbilisi in 2007. At an initial stage, this figure will be one million passengers and 6.5 million tons of cargo.
Trains can depart from cities in China, cross into Kazakhstan at the Khorgos Gateway, be transported across the Caspian Sea by ferry to the New Port of Baku and then be loaded directly onto the BTK and head to Europe.
The inauguration ceremony draw a host of dignitaries, including the Presidents of Azerbaijan, Turkey, Kazakhstan, Georgia and Uzbekistan.
The line, which includes 105 km of new track, will have the capacity to transport one million passengers and 5 million tons of freight.
"Of course, energy and transportation issues have been traditionally discussed at today's meeting", said the Azerbaijani president, and added that "we are moving confidently towards the set targets".