The changeover from the kroon to the euro started at midnight (2200 GMT) in the small Baltic nation of 1.3m people.
Prime Minister Andrus Ansip marked the event by withdrawing euros from a cashpoint.
"It is a small step for the eurozone and a big step for Estonia," he said, holding the euro notes.
For many Estonians, 20 years after breaking away from the Soviet Union, the euro is proof that they have fully arrived in the West, the BBC's Baltic region correspondent, Damien McGuinness, reports.
Estonia joined the EU in 2004 - one of eight former Communist countries that did so, including its Baltic neighbours Latvia and Lithuania.
Two other ex-Communist countries - Slovenia and Slovakia - are already in the eurozone.
Anxiety about prices
Estonia's government says the euro will attract foreign investors because devaluation is then ruled out.
However, poorer Estonians fear that prices will be rounded up, and that food will become even more expensive. And the prospect of having to contribute to bail-outs of richer eurozone countries is hard to stomach, our correspondent reports.
In the past year Europe's debt crisis has hit Estonia severely. The tough cuts in state spending, necessary to join the eurozone, have pushed unemployment to more than 16%.
To avoid a last-minute rush, Estonians were able to swap kroons for euros commission-free from 1 December, the AFP news agency reports.
Kroons will be used in parallel with the euro for the first half of January. Banks will swap Estonians' kroons for euros until the end of 2011 and the central bank will carry on doing so indefinitely.
The kroon has been pegged to foreign currencies from the start, first to the deutschmark and, in 2002, to the euro.
The rate of 15.65 kroons to one euro has never changed.
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