Pilots hovered the tilt-rotor aircraft up to 30 feet above the runway and conducted maneuvers at the Naval Air Station at Patuxent River.
While the Osprey has the ability to take off like a helicopter, rotate its propellers 90 degrees and fly like an airplane, it stayed in helicopter mode during its first flight.
A cheering crowd of 200 technicians, engineers and military officials watched the V-22 take off.
"It's gone well beyond our expectations," Marine Col. Dan Schultz, the V-22 program manager, said after the plane performed a series of turns.
Over the next year, the military will test seven modified V-22s at Patuxent River and four at Edwards Air Force Base in the California desert.
Pilots will take the planes through a series of maneuvers, including fast descents, to determine whether changes in hydraulic systems and other modifications have corrected problems that led to the crashes.
The Marines hope to have the V-22 in service by December 2003, Schultz said. The Marine Corps hopes to replace its aging fleet of assault helicopters with the Osprey.
The entire fleet was grounded in 2000 after two crashes that year during training flights. A crash in December 2000 killed four Marines in Jacksonville, N.C., and 19 Marines died when a V-22 crashed in Arizona in April 2000.
In June of 2001, the results of a six-month investigation into the radical aircraft confirmed that some U.S. Marine Corps officers apparently were willing to lie to keep the Osprey flying.
CBS News National Security Correspondent David Martin reports the investigation by the Pentagon's Inspector General was begun as a result of a secretly recorded audio tape on which Lt. Col. Fred Leberman could be heard telling members of his squadron why they had to lie.
"The reason we need to lie or manipulate the data, or however you want to call it, is that this program is in jeopardy," he said.
The records were falsified after the two Ospreys had crashed. The Pentagon found the deception played no role in the deadly accidents.
According to the Inspector General, Leberman believed he was doing exactly what senior Marine Corps officers wanted, but the investigation found no evidence anybody had ordered him to falsify the records.
However, a number of officers below Leberman knew about it and did nothing to stop it.
Two officers received letters of reprimand in September.
The project's fate affects more than 2,000 Texas employees of Bell Helicopter Textron at Fort Worth and Amarillo, where work on tilt-rotors has been in partnership with Boeing's Pennsylvania-based helicopter division.
One of the crashes was attributed to vortex ring state, a phenomenon that can cause an aircraft to lose altitude quickly. Schultz said changes had been made to alert pilots to conditions that could lead to vortex ring state.
V-22 pilots will be trained to maneuver out of VRS situations, and technicians have also changed the V-22's hydraulic system to prevent failures caused by chafed hydraulic lines, he said.
"The indications are that this aircraft can handle VRS better than any airplane and any helicopter out there," Schultz said.
"We'll know the first day of flying if this airplane is put together right," said Tom McDonald, a Boeing test pilot, who will fly the aircraft.
Built by Boeing Co. and Bell Helicopter Textron Inc., each V-22 costs $89.7 million. Only 20 have been built so far.