Jews and Christians attended the dedication ceremony
It is the first synagogue to have been built in the former East Germany since World War II.
The old synagogue was razed on 9 November 1938 - known as Kristallnacht, or the night of broken glass - when Nazi sympathisers rampaged through German towns destroying Jewish property.
The head of Germany's Jewish Community, Paul Spiegel, said the building was a concrete expression of Jews' desire to stay in Germany.
Dream come true
"It's a visible sign that, despite everything that has happened, there's Jewish life here again," he said.
"But whether there will be Jewish life here in the future doesn't just depend on Jews, it depends on non-Jews," he added.
The Rabbi for the region, Salomon Almekias-Siegl, said a dream had become reality.
Dresden's Jewish population was all but wiped out by the Nazis - dropping, according to some figures, from 6,000 to around 50.
But like elsewhere in Germany, numbers have swelled in recent years aided by immigration from the former Soviet Union.
The DM 21m ($9.5m) building was financed by the regional government of Saxony, the city of Dresden and private donors.
City resurrected
As well as being a long-held dream for the Jewish Community, the building of the synagogue is part of the ongoing reconstruction of Dresden - one of the cities worst hit by allied bombing in World War II.
"The Jewish community expressed the wish, that if everything was being restored, including the (historic church) Frauenkirche then the synagogue should be rebuilt," the foundation's treasurer, Juergen Mueller, told JTA.
One remnant of the original synagogue - built by one of the most prominent German architects of the 19th Century, Gottfried Semper - was returned to the new building.
A local firefighter, Alfred Neugebauer, salvaged the original Star of David as the synagogue burned and hid it in his home until after the war. The star was installed above the entrance of the new building.
The new structure is a daring modern cube construction and the site of the original building is still marked by glass splinters in the ground.