A firework display lit up the sky around Big Ben and the London Eye for seven-and-a-half minutes
More than 200,000 people lined the Thames in London to watch a firework display to welcome in the new year.
Clear skies gave the crowds a perfect view of the seven-and-a-half minute display above the London Eye.
The £313,000 display was cut by two minutes this year, helping organisers save a total of £70,000.
But deputy mayor of London Richard Barnes, who was in charge of the fireworks, said the event was still a "good bang for your buck".
He said the major cost of the event was ensuring the safety of the crowd and organising travel arrangements so they can get home.
The Tube, DLR and buses allowed people to travel for free until 0430 GMT, but revellers still had to pay for using most mainline train services.
Most rail operators said they were unable to offer free travel on New Year's Eve following the withdrawal of £100,000 in tax subsidies by the current mayor, Boris Johnson.
Free Southern train services ran from Victoria to East Croydon every 20 minutes.
Night buses were to run as usual while some National Rail services from London were to continue throughout the night.
Speaking ahead of the event, Mayor of London Boris Johnson said: "I know for many people in London 2009 has been a very tough year, but there are signs of optimism everywhere.
"I hope that people will celebrate all the hard work they've put into 2009."
He added: "London is the greatest place to have a party any day of the year."
Radio 1 DJ Nihal provided a soundtrack to the party at the London Eye, while a host of other DJs and pop stars were to perform at pubs and clubs across London.
Many flocked to viewpoints such as Primrose Hill in Camden, north London, where private displays competed with fireworks visible from central London.
American students have been involved in rehearsals for the parade
London's New Year's Day Parade live online on Friday
Among the acts appearing elsewhere in London were Calvin Harris at the O2 Arena, Boy George at the Leicester Square Theatre Basement and Judge Jules at the Ministry of Sound.
More than 3,000 Metropolitan Police (Met) officers were on duty and by 0330 GMT had made 78 arrests.
Those arrested were held for various offences including being drunk and disorderly, assault, public order offences, possession of drugs and sexual offences.
Two people were rescued from the Thames in separate incidents by officers from the Met's Marine Support Unit and the RNLI.
They were both taken by ambulance to hospital where their conditions were said to be non life-threatening.
On Friday, 400,000 are expected to watch the New Year's Day Parade, which will set off from the Ritz Hotel at noon and end in Parliament Square.
Preparations for London's fireworks