The cable line connects the capital La Paz with the nearby city of El Alto, through the high Andes mountains, offering stunning views of the snow-capped Illimani, one of Bolivia's highest peaks.
Constructed by the Austrian company Doppelmayr for $234 million, the line allows passengers to travel between the two cities in less than 10 minutes, compared to more than 30 minutes by road.
"It is a joy that this cable car line is finished," Morales cheered during the inauguration ceremony in La Paz.
"It's important work for the residents of La Paz."
La Paz is the highest capital in the world, at an altitude of 3,660 meters.
After the ceremony, long lines of people waited in the terminals at both ends, eager for their first experience in the cable car.
A "speechless" Jorge Villena was one of the first passengers.
"It's awesome: the quiet, the view, the Illimani. It's perfect," the 25-year-old bank employee told AFP.
The cable car line will ultimately travel nearly 10 kilometers (six miles). After the first installment -- which stretches about 2.6 kilometers -- a second segment of 7.3 kilometers is due to be inaugurated by the end of the year.
La Paz and El Alto, an urban conglomerate of more than 1.6 million people "are among the first 10 cities in the world with an inter-city transport system by cable," said Jorge Dockweiler, director of the state-run Mi Teleferico company.
Cars will run 17 hours a day, 360 days a year and can transport up to 18,000 people an hour, according to official projections.
A ticket goes for three bolivianos ($0.43), and each car can carry up to 10 passengers.
The only other cable car system in Bolivia is in the city of Cochabamba, in the center of the country, and is designed for tourists.