The new Thar Express train will connect the border towns of Munabao in the Indian state of Rajasthan to Khokrapar in Pakistan's Sindh province. The train crossed into India early on Saturday, carrying some 200 passengers.
The two countries resumed a train service between Lahore in Pakistan and Amritsar in India in 2004.
The decision to reopen the rail link is yet another step in a peace process that began in January 2004 and which has seen the easing of a number of travel restrictions.
I am going home for the first time after 58 years Mohammad Ali Azhar, passenger from Pakistan
A military band played traditional tunes and hundreds of people cheered as a train rolled into a small desert town in western India.
Dancers wearing traditional dresses greeted the colourfully decorated train.
"I was 13 years old when I came here. Now I am going to my home for the first time after 58 years," Mohammad Ali Azhar, a passenger from Pakistan told Reuters.
Another passenger Ladhi Singh Sodho, a Pakistan-based engineer, said he was visiting his in-laws for the first time since he and his wife married in 1992.
"We belong to this desert. This sand does not distinguish between Hindu and Muslim. This is sand of my own people," he said.
Pakistan will operate the two-way service every Saturday for the first six months of the year, and India will take over for the second half of the year.
The Samjhauta (Friendship) Express, which runs across the Wagah crossing point in the Punjab, was restored in January 2004 after a two-year suspension.
Analysts say the new service may contribute to the easing of tension between the nuclear-capable rivals.
