Built by Hindustan Aeronautics Ltd (HAL), the Tejas - meaning radiant - is expected to replace the ageing fleet of Russian MIG-21s.
The company handed over two of the aircraft to the air force on Friday.
It is not the first Indian-made fighter jet - that was the HF-24 Marut, which was also built by HAL, in 1961.
The Tejas was designed and manufactured in India, although some technologies, such as its engine and radar, have been imported.
It was declared fit to fly in 2011.
The two aircraft will be part of a squadron named 'Flying Daggers' 45, the PTI news agency reported.
The air force aims to induct a total of six Tejas aircraft this financial year and eight in the next, the report added.
The Tejas is touted by Indian defence officials as the smallest lightweight, single-engine, tactical fighter aircraft in the world.
The fighter - which can carry air-to-air and air-to-surface weapons - has been long delayed by technological hurdles.
US sanctions imposed after India carried out nuclear tests in 1998 further stalled development of the jet.
The first Indian-designed fighter jet, the Tejas, has been inducted into the country's air force, 31 years after it was first conceived.