More than 2000 people, mostly family groups, lined Tarbert Street for the mardi gras.
The Otago Daily Times-sponsored event was revived this year after more than a decade, as part of the "back to basics" festival.
Mardi gras convener Brent Ross was "blown away" by the support for the evening: "I never expected this."
The focus was on free, family-friendly entertainment, with activities including a decorated bicycle competition, bed racing, a fire engine pull, bicycle races and a Festival King contest.
Mr McPherson told the crowd to congratulate itself.
"You've got your festival back and this is just the start," he said.
Alannah Kys (6), of Alexandra, was at the mardi gras with her nana, Carol Woods.
Mrs Woods said it was nice to see the "back to basics" approach for this year's event: "I like the home-grown approach and the kids are enjoying the chance to get involved."
Alannah dressed in a pirate costume for the occasion and said she planned to enter the bicycle races next year.
"It's all going to be fun," she said.
Festival chairwoman Clair Higginson said the forecast was for settled weather today for the highlight of the festival, the float procession, which features 15 competitive floats.
"Everyone's buzzing and it's all going amazingly well. All the boxes seem to be ticked, except for the weather, which we can't control."
Ms Higginson said the festival was all going according to budget.
She was "cautiously optimistic" the event would at least break even or make a small profit.
When the future of the event was under threat earlier this year because of several years of successive losses, the community said the festival should go back to basics and involve all the community.
"We've stuck to that criteria."
Earlier in the evening, several hundred people turned up to cheer on the competitors in the fourth Round the Clock Race, sponsored by The News.
Eleven competitors took part in the individual race, with Michael Wright of Ettrick the first home, in 7min 49sec.
Wright said he was "hurting a lot" after the race, which involved competitors starting in the Linger and Die reserve, running up to the giant clock on the hill and down again.
Louise Thompson won the women's title, in a time of 10min 28sec.
Nine groups took part in the team race, with the Breens' group the winner.
The team comprised Matt Smith, Kieron Ingram, Craig Ross, Matt Love, Sam Williams, Peter Breen, Jacob Shirley and Kendra Breen.
They completed the relay in 4min 33sec, with team members running, cycling and riding a horse at various stages.
