Passengers will now be able to travel in an orbital route on London Overground with the opening of a new link in the south.
The 6.76-mile long £75m rail link joins Surrey Quays in the south-east with Clapham Junction in south London.
The orbital, which London Mayor Boris Johnson dubbed the "M25 of rail", will mean cheaper fares and cut congestion by avoiding central London, Transport for London (TfL) said.
But a passenger watchdog and some local residents feel those bound for central London will be "worse off" as they will lose the links which were earlier provided by the South London Line.
The Overground now goes through 21 of London's 32 boroughs, and the orbital will allow passengers to go on its different routes via Willesden Junction, Clapham Junction, Highbury and Islington and Gospel Oak stations.
It is the first orbital rail route for London since the Circle Line on London Underground was built in 1884.
Mike Stubb, director for London Overground said: "The mayor called it the M25 of rail, but we think we are better than that because we keep moving."
Four trains an hour will run on the route, stopping at Queens Road Peckham, Peckham Rye, Denmark Hill, Clapham High Street and Wandsworth Road, carrying up to 12.3 million people a year.
It takes over South London Line services between London Bridge and Victoria via Denmark Hill and Peckham Rye. The service was withdrawn as Thameslink undergoes an upgrade.
Howard Smith, TfL's chief operating officer for rail, said it would save passengers time and money.
He said: "It'll take tens of thousands of people out of the middle of London. The number of journeys on the Overground per day is more than 300,000, that's going to go up by about 25,000 every day."
About 1.3km (0.8m) of disused tracks dating back to 1913 have been rebuilt, but the rest of line was already in use.
Two extra platforms were created at Clapham Junction for the new service, which will have 48 new drivers. The total number of trains on the Overground will also rise from 945 to 1,090.
There could be a new station at Surrey Canal Road in future if a planned regeneration of the area goes ahead, TfL said.
Margot Heller, director of the South London Gallery, said their proximity to Peckham Rye station would help boost visitors.
It would also improve connections with another gallery it is working with for an exhibition, Calvert 22, which is located on the Overground's East London Line (ELL).
"It is bound to impact positively on our visitor numbers as it will make it so much easier to get to the gallery from all over London.
Her optimism comes after a group of 11 museums, including the Geffrye Museum in Shoreditch, appeared to benefit from the opening of the ELL in 2010.
The museum saw visitor numbers rise from 93,365 in 2009-10 to 104,889 in 2011-12, with 63,874 people having visited the museum since April.
David Dewing, director of the Geffrye Museum, said: "It will have a massive impact on the economy of this part of east London."
Southwark Rail Users Group, a local residents' group, held a demonstration at Denmark Hill on Saturday to "mourn the loss" of South London Line services into central London.
Jane Smart, from Peckham Rye who commutes to Victoria, said she would have to take a train to Clapham and then a bus.
"My current journey of a quick 15 minute ride on the train will more than double. In fact, 15 minutes could become 40 minutes or more," she said.
Both passenger watchdog London TravelWatch and Labour's transport spokesperson in the London Assembly, Val Shawcross, also criticised the move.
Richard Freeston-Clough, spokesman for London TravelWatch, said despite a more frequent service "some existing users will be worse off".
Ms Shawcross said: "The South London Line is also highly valued by staff and patients at four key London hospitals - Guys, St Thomas, Kings College and the Maudsley, as it provides a direct link between Denmark Hill (where Kings College and Maudsley hospitals are located) and London Bridge ( for Guys)," she added.
Denmark Hill and Peckham Rye are still served by direct trains to Blackfriars and Victoria provided by Southeastern.
TfL said the mayor was in discussions with the government about creating a new off-peak service from 2014 to connect Bromley South to Victoria, stopping at Peckham Rye and Denmark Hill.