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French President Jacques Chirac hosted officials from the EU, the United States, India, China, Japan, South Korea and Russia in launching the ITER project in Paris.
EU Commission President Jose Manuel Barroso called it a "historic event" in the effort to phase out polluting fossil fuels.
The reactor will be built in Cadarache in the southern French region of Provence. The project is promoting the future of fusion, which reproduces the sun's power source and produces no greenhouse gas emissions and only low levels of radioactive waste.
The International Thermonuclear Experimental Reactor is expected to create about 10,000 jobs and take about eight years to build. If all goes well with the experimental reactor, officials hope to set up a demonstration power plant in Cadarache around 2040.
Chirac expressed pride that France was chosen for the site and pledged to be vigilant in making sure the project fulfils its vision.
Environmental activists, who generally oppose nuclear power, have argued that the project would turn the focus away from current efforts to fight global warming.
Fusion, which powers the sun and stars, involves colliding atoms at extremely high temperatures and pressure inside a reactor. When the atoms fuse into a plasma they release energy that can be harnessed to generate electricity.
While fossil fuels will run short, the reactor would run on an isotope of hydrogen, a virtually boundless source of fuel that can be extracted from water.
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