American team chief Sandy Baldwin said the facility was "beautiful".
The village was opened by Australia's oldest surviving Olympian, 93-year-old Edie Payne - who competed as a sprinter the 1928 Amsterdam Games.
The 2,000 athletes who arrived on Saturday will be joined by about 8,000 more in the next 10 days prior to the opening ceremonies on 15 September.
There will also be 5,000 officials in residence from 199 countries - and a staff of 7,000 people, mostly volunteers will ensure the smooth running of the village.
Competitors from Hong Kong and Estonia were also among the first to take up residence at the superb village which is within walking distance of all the main venues.
The vast majority of British representatives were leaving from London on Saturday for a warm-weather training camp on Queensland's Gold coast.
British Olympic Association chef de mission Simon Clegg said: "It's a great village, absolutely fantastic and everything they said it would be. This is my eighth Olympics and it is undoubtedly the best of all time.
"The living conditions are first class. I have no doubt the athletes will enjoy it to the full."
American team chief Sandy Baldwin said the facility was "beautiful".
"Our people have never seen anything quite like it - the flowers in bloom, the landscaping - it's really spectacular. The open space is a real plus."
International Olympic Committee official Pere Miro said the Sydney organisers should be congratulated.
He said: "This Olympic village is magnificent - it has great quarters, a superb location and very good services.
"This village is the heart of the Games, the place where more than any other the spirit of the Games prevails. You have created the perfect environment."
The village has cost US$350m to create and became New South Wales state's fifth-largest city with its official opening.
It will become the Sydney suburb of Newington after the Games.
The athletes at Homebush Bay will be housed in 1,000 new houses and apartments in the same general area as 13 venues hosting 17 sports.
Services for the athletes include a supermarket, post office, bank, florist, travel agency, medical centre and disco.
Village mayor Graham Richardson said: "We've taken in 600 athletes this morning and by the end of the day we expect to have almost 3000 arrive.
"Thereafter there will be 2,500 arriving on a daily basis and when all 199 National Olympic Committee's are complete there will be a figure of over 10,000.
"We promised this village would be for the benefit of the athletes. Thirteen venues, 15 sports and 19 disciplines are within a kilometre of here.
"The facilities are way beyond what the athletes will have ever experienced."
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