The satellite, named "Giove A," took off from the Baikonur Cosmodrome in Kazakhstan aboard a Soyuz rocket on schedule at 11:19 a.m. local time (0519 GMT). After the launch amid clear skies, the satellite was released into orbit and began transmitting signals, scientists said.
Journalists monitored the liftoff through a linkup at the headquarters of the European Space Agency, or ESA, in Paris.
The euro3.4 billion (US$4 billion) Galileo project will eventually use about 30 satellites and end Europe's reliance on the GPS system, which is controlled by the U.S. military.
Last year, U.S. President George Bush ordered plans for temporarily disabling GPS satellites during national crises to prevent terrorists from using the navigational technology.
Galileo is under civilian control. The European Space Agency says it will guarantee operation at all times, except in case of "the direst emergency." It also says users would be notified of any potential satellite problems within seconds.
"Galileo is made in Europe by Europeans," ESA spokesman Franco Bonacina said. For now, "If the Americans want to scramble GPS, they can do it whenever they want."
Galileo will also be more exact than GPS, with precision of up to one meter, compared with five meters with GPS technology, Bonacina said. With Galileo, for example, rescue services will be able to direct ambulances which lane to use on the highway, he said.
The satellite launch was originally scheduled for Dec. 26 but was delayed because of a technical problem in the ground station network. In orbit, Giove A will test atomic clocks and navigation signals, secure Galileo's frequencies in space and allow scientists to monitor how radiation affects the craft.
A second satellite named "Giove B," "Galileo In-Orbit Validation Element," will be placed in orbit this spring.
Two more satellites will be launched in 2008 to complete the testing phase, which requires at least four satellites in orbit to guarantee an exact position and time anywhere on earth.
Three non-EU nations, China, Israel and Ukraine, have also signed on to the program set up by the European Commission and European Space Agency. Discussions are also under way with India, Morocco, South Korea, Norway and Argentina, the EU says.
The EU is to allocate an initial euro1 billion (US$1.2 billion) from its 2007-2013 budget to fund deployment and commercial operations of the Galileo satellite system. The private sector will contribute two-thirds of the funds for the project, which is expected to create more than 150,000 jobs in Europe alone.
Galileo will more than double GPS coverage, providing satellite navigation for people from motorists to sailors to mapmakers. In particular, Galileo is expected to improve coverage in high-latitude areas such as northern Europe.
Consumers are expected to be able to buy Galileo-ready receivers from 2008, and they will be able to switch back and forth between GPS and Galileo, similar to how people can change between cell phone networks now, Bonacina said. People should be able to hook up to Galileo by 2010.
Last year, the EU and the United States made a deal to make Galileo compatible with the GPS system, ending a trans-Atlantic feud over the issue.
The Pentagon had initially criticized Galileo as unnecessary and a potential security threat during wartime, saying its signals could interfere with the next-generation GPS signals intended for use by the U.S. military.