The low cost carrier's A320 aircraft, JQ283 touched down shortly after 11am with more than 160 passengers who were greeted by a pipe band, and given goody-bags and orange cupcakes.
A planned water cannon welcome was cancelled due to the cold conditions.
Jetstar Australia's New Zealand chief executive, David Hall, said the airline's arrival would result in 129,000 extra seats on the Dunedin-Auckland route - about 30% of the market - with more possible.
"We have broken that monopoly and that is fantastic."
Mr Hall said Jetstar's model was that of a low cost carrier; high utilisation of aircraft and fast turnarounds, offering consumers fares up to 40% cheaper than its arrivals while providing choice on seating and baggage.
"We are able to create a good level of competition, have good affordable fares, and our fares are sustainable all day and everyday.
"This is a great market for family and friends, great fares for students travelling a tremendous destination and we want to see it grow and prosper."
When demand changed, the airline had the ability to mobilise its large fleet across the Jetstar route, and New Zealanders were likely to see this with the Rugby World Cup.
Queenstown was an important market for Jetstar, and the unveiling of new runway lights at the airport coupled with the airline's long-term $10 million investment in required navigation performance (RNP) last year.
"That will remove any risk of diversion to very low numbers, and very safe operations along with the runway lights."
Queenstown was likely to be served by more capacity during the Rugby World Cup, as would Auckland, Wellington and Christchurch, with details yet to be finalised, he said.
With five New Zealand domestic destinations the airline planned to consolidate before adding new routes, with Hamilton, Rotorua and Invercargill possibilities.
"'We are always in discussions with people."
Dunedin International Airport chief executive, John McCall, said the arrival of the low cost carrier meant a different product in the marketplace, which would ultimately benefit consumers.
"There is now choice and competitive pricing. When fares go down, demand goes up."
Eighteen part-time jobs had been created, mainly in baggage handling and customer service.
Jetstar
• Daily Dunedin to Auckland flights.
• Adds 129,000 extra seats.
• Eighteen new part-time jobs created in Dunedin.
• Dunedin has become New Zealand's fifth destination, after Christchurch, Queenstown, Wellington and Auckland.
• Is a subsidiary of Qantas and operates eight aircraft in New Zealand.
