Work on the Xayaburi dam has begun despite fervent and sustained opposition from neighbouring countries and environmentalists.
Lao Deputy Prime Minister Sarnsawad Lengsawat acknowledged the concerns of the Mekong countries.
"We had the opportunity to listen to the views and opinions of different countries along the river. We have come to an agreement and chose today to be the first day to begin the project," he said.
As one of the poorest countries in Southeast Asia, Laos hopes this hydropower dam on the Mekong river will help it become the "battery of Southeast Asia".
For the past two years, a Thai construction giant has been carrying out preliminary work, waiting for the green light to begin construction.
It says the dam will spur development.
"The biggest benefit is electricity. It's a benefit that will help the poor people of Laos, in the Mekong region, for development and growth," Southeast Asia Energy Limited engineer Somkuan Watakeekul said.
However, Mekong countries downstream say those benefits will come at too high a price, and many fear the dam will affect fish stocks and the livelihoods of millions.
Last December, Laos buckled under the pressure, agreeing to suspend the project pending a study led by Japan. The government says environmental concerns have now been addressed, but environmentalists say there's an issue of trust.
"We hope that the government including Cambodia and Vietnam and all the donor governments will ask tougher questions of Laos, not just assume that this study on the face are enough and will insist that the construction is delayed," said Kirk Herbertson, Southeast Asia Policy Coordinator of International Rivers.
And in a last ditch attempt to stop the project, demonstrators in Thailand took their message to the water. But it's had no effect. The dam is due to be finished by 2019.