The 11m-tall (36ft) cylinder stands outside Atocha station, the destination of the four trains that were attacked.
Thousands of messages of condolence made in the days after the attacks are inscribed on the inside of the tower.
King Juan Carlos, Queen Sofia and Prime Minister Jose Luis Rodriguez Zapatero attended a sombre ceremony at the site.
Wreaths were laid at the foot of the tower and mourners observed three minutes of silence.
Madrid Mayor Alberto Ruiz Gallardon welcomed the unveiling of the memorial.
"It is a monument that, in addition to astonishing with its beauty, will perfectly symbolise the pain of the victims and of all the citizens," he said
The messages of grief can be seen from a chamber beneath the hollow monument.
More than 1,700 people were injured in the attacks, which investigators have attributed to a local cell of Islamic extremists inspired by al-Qaeda.
Last month the trial began of 29 people over the attacks, seven of whom face charges of murder and belonging to a terrorist group.
The trial is expected to last for several months and hear from hundreds of witnesses and police experts.
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