President Fernando Henrique Cardoso flew to the jungle city of Manaus to inaugurate the System for the Vigilance of the Amazon (SIVAM), as the project is called.
Its network of radars, control towers and aircraft will also help to catalogue the forest's immense diversity of plant, insect and animal life and monitor indigenous populations.
The SIVAM programme began 10 years ago in response to illegal activities that infest the Amazon forest - the size of western Europe.
But critics say the radar system, which was designed by an American company, will give Big-Brother-style control over the Amazon and its border with cocaine-producing Colombia to the United States.
"It is clear that this was a geopolitical move by the United States with grave consequences for possible military activities," said opposition lawmaker Arlindo Chinaglia, who backs the re-opening of a congressional probe into SIVAM.
'Gaping hole'
Critics also claim that US radar designers Raytheon received preferential treatment in winning the contract. Brazil's Aeronautics Ministry denies the claims.
Facts and forecasts
SIVAM officials say that the 25 radars, control towers and surveillance planes will be a vital tool against drug or wood smugglers whose runways and roads are camouflaged by the forest canopy.
"There was a gaping (security) hole over more than half of the Amazon," said SIVAM spokesman Jurandyr Fonseca.
But defence experts say the radar will be a toothless tiger, with the Brazilian military banned from shooting down suspect aircraft.
"We are going to be in a pretty pathetic situation," said Roberto Godoy, a defence affairs correspondent with Estado de S.Paulo daily.
"We have the electronic eye, the capacity to intercept - but we are not permitted to do this."
Environmentalists are also sceptical that wildlife will benefit because of budget cuts to federal environmental agencies.
"Fighting logging has nothing to do with registering that logging is going on," said Paulo Adario, coordinator of Greenpeace's Amazon campaign. "It has everything to do with political, economic and administrative measures."