The water level of China's Three Gorges reservoir has reached its interim target depth of 135 metres (440 feet), five days ahead of schedule.
The dam now holds back 10bn cubic metres of water
China's official media said the reservoir - the world's largest water control project - was now deep enough for the dam's turbines to begin generating hydroelectric power, and for passenger and cargo ships to resume sailing on the Yangtze River.
The sluice gates of the 190m (630 feet) high dam began closing at midnight on 1 June, and since then the water level behind the dam has been gradually rising.
The massive concrete wall now holds back an estimated 10bn cubic metres (350bn cubic feet) of water.
"Successful completion of water storage means the Three Gorges project has overcome the first challenge of nature," Zhang Chaoran, chief engineer of the Three Gorges corporation, told the state-run Xinhua news agency.
Shipping on the Yangtze, one of China's main transport routes, is set to resume on 16 June, after being banned in April due to the construction project.
A giant lock built next to the dam will carry ships around the huge concrete wall.
The sluice gates shut at the beginning of the month
The water level has also risen to a sufficient level to begin testing the dam's 26 generators, which will eventually produce a combined 18.2m kilowatts of energy.
The first two generators began trial operations on Tuesday.
But one problem encountered by the dam's engineers is the large amount of debris in the reservoir - such as tree branches and rubbish - which threatens the safety of boats in the area.
A spokesman for the Three Gorges corporation said the company was mounting a clean-up operation to clear the debris.
The Three Gorges dam is unprecedented in both the scale of
its construction and the number of people who have been forced to move to make way for the project.
By the time it is completed, the water level will reach a depth of 175 metres (574 feet), and create a reservoir which is 600 km (375 miles) long.
Many villages and towns - and even some small cities - along the banks of the densely populated Yangtze have already been submerged by the rising waters.
More than 600,000 people have been forced to relocate, some as far away as Shanghai, 1,000 km (600 miles) east. About 1.3m people will eventually have to move.
China's leaders say the country needs the 180bn yuan (US$22bn) dam to produce electricity, as well as control the annual flooding of the Yangtze.
But critics are worried about the destruction of dozens of cultural heritage sites.
And they say that if the dam breaks, it would spell disaster for those living down-river.
Many environmentalists have also warned about the danger of soil erosion, as well as pollution caused by trapped sewage and industrial waste.