The 1,380 kg Chandrayaan-1, carrying 11 payloads, was released into a Transfer Orbit 18.2 minutes after the PSLV-C11 blasted off.
After a series of procedures over the next two weeks, the spacecraft would reach its desired Lunar orbit and placed at a height of 100 km from the Lunar surface, marking the operational phase of the mission which would put India in the elite lunar club.
Earlier, at the end of the 49-hour countdown, the 44.4 meter tall four-stage PSLV-11 lifted off from the second launch pad into a cloudy sky.
This is the 14th flight of ISRO's workhorse PSLV, which had launched 29 satellites into a variety of orbits since 1993, and 13th successive one in a row.
Chandrayaan-1 is carrying 11 payloads, five entirely designed and developed in India, three from European Space Agency, one from Bulgaria and two from US, which would explore the Moon over the next two years.
Indian Space Research Organisation Chairman G Madhavan Nair described the successful launch as a historic moment in India's space programme.
"The launch was perfect and precise. The satellite has been placed in the earth orbit. With this, we have completed the first leg of the mission and it will take 15 days to reach the lunar orbit," Nair announced in the mission control centre.
Speaking to NDTV, Chief of the Indian space program Madhavan Nair gave details about the moon mission.
NDTV: What will it do sir? Is it carrying human beings?
Madhavan: No. This is actually a totally instrumental system
NDTV: So it is an unmanned satellite?
Dr G Madhavan Nair: Unmanned satellite, and it is mainly, almost like our earth observation satellite. This is going to observe the moon.
NDTV:: So it will essentially map the moon one can say?
Dr G Madhavan Nair: Absolutely. In fact today maps are available for certain specific regions with a lower resolution. Here we have got imaging systems which will give almost 10m resolution. So it will be a precise image of the entire surface.
The rocket that is carrying India's first unmanned satellite to moon is as high as a 7-storey building and weighs nearly 300 tonnes.
One after the other, four stages of the rocket will ignite taking Chandrayaan higher into space.
The Chandrayaan will first make a few revolutions around the Earth so that it gathers enough momentum to reach the moon.
But it will take several days before it covers the 4 lakh kilometers to reach its destination.
The satellite will be captured by moon's gravity and initially it will revolve nearly a thousand kilometers from the moon's surface.
But finally it will move closer to nearly 100 kilometers literally over the moon.
Once that's done, it will spend the next two years mapping the moon's surface and sending data to India.
And among the first things it does will be to plant India's national flag on the moon.
Then as part of its many other challenging objectives the multi-continent mission will begin the most intense search ever undertaken for life giving water on the moon.
"We have designed and built this instrument for Chandrayaan-1 to search for the water ice over the lunar poles and will be most extensive search of this type in history," said Dr Stewart Nozette, NASA and Lunar Planetary Institute, Houston, USA.
Once scientific data has been gathered by the satellite, sending it back to Earth will be a big challenge.
Digitally talking to the mooncraft will not be easy as the satellite will be almost 4 lakh kilometers away. And to gather the faint signals a dish antenna that weighs 60 tons has been set up at a small village called Bylalu near Bangalore. Part of the hi-tech data centre is still being constructed at the village where labourers sweat it out without even knowing that their efforts are taking India to outer space.
(With PTI inputs)