Branches were replenished with cash overnight and police were deployed amid fears of a run on the banks.
Some queues did form but customers face strict controls on daily withdrawals and the mood was generally calm.
The restrictions on the free movement of capital represent a profound breach of an EU principle, correspondents say.
However, the European Commission on Thursday justified the move, saying the "stability of financial markets and the banking system in Cyprus constitutes a matter of overriding public interest".
Cyprus is the first eurozone member country to bring in capital controls.
Cyprus needs to raise 5.8bn euros to qualify for a 10bn-euro bailout from the European Commission, European Central Bank and the International Monetary Fund, the so-called troika.
As part of the bailout plan, depositors with more than 100,000 euros will see some of their savings exchanged for bank shares.
An earlier plan to tax small depositors was vetoed by the Cypriot parliament last week.
Loss of trust
Branches began to open at noon local time (10:00 GMT) and will close at 18:00 (16:00 GMT).
Some did not open on time, causing tension among customers. The longer queues were forming outside branches of Laiki, which is being wound up.
One customer in a queue in Nicosia said that he was withdrawing the allowed daily amount of 300 euros but would take out all of his money if he could.
Our correspondent says the predictions of a stampede did not materialise and in some places there were more journalists than depositors.
Another customer, jewellery shop owner, Roula Spyrou, said. "There's going to be queues so I'm not going to spend so many hours there to get 300 euros."
Some armed police have been deployed in cities and hundreds of staff from the private security firm G4S are guarding bank branches and helping to transport money.
The stock exchange, shut since 16 March, remains closed on Thursday and will not reopen until after Easter.
In a statement issued on Wednesday, the ministry of finance insisted the capital control measures were temporary and were needed to "safeguard the stability of the system".
It read: "The Central Bank of Cyprus and the government of Cyprus will review them each day, with a view to progressive lifting of the measures as soon as circumstances allow. "
The severe new rules have been imposed to prevent a torrent of money leaving the island and credit institutions collapsing.
As well as the daily withdrawal limit, Cypriots may not cash cheques.
Payments and/or transfers outside Cyprus via debit and or credit cards are allowed up to 5,000 euros per person per month.
Transactions of 5,000-200,000 euros will be reviewed by a specially established committee, with applications for those over 200,000 euros needing individual approval.
Travellers leaving the country will only be allowed to take 1,000 euros with them.
On Wednesday night, hundreds of protesters rallied outside the presidential palace, chanting: "I'll pay nothing; I owe nothing," the Reuters news agency reported.
Many economists predict the controls could be in place for months.
The unprecedented restrictions represent a profound breach of an important principle of the European Union that capital, as well as people and trade, should able be to move freely across internal borders, says the BBC's economics correspondent Andrew Walker.
However, the European Commission said member states could introduce capital controls "in certain circumstances and under strict conditions on grounds of public policy or public security".
But it added that "the free movement of capital should be reinstated as soon as possible".
The vice-president of the Cypriot Employers Federation, Demetria Karatoki, said that he believed the country could pull through.
"Although there is going to be hardship, at the end of the day we can start rebuilding our economy on a sound basis," he said.
But British Cypriot businessman, Costa Thomas, said he had lost faith in the system.
"No-one really trusts politicians. So why should we believe them that these controls are going to last only a few weeks and we're going to get shares and get the money back?" he asked.
One employee of the Bank of Cyprus said that everybody's jobs were at risk.
"If the Bank of Cyprus collapses, all the small business, the large businesses, everything collapses. They cannot buy anything, import anything, export anything. There is nothing," she said.
Source: BBC News
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