The flame was kindled by a “high priestess” who captured the morning sun’s rays in a parabolic mirror.
The flame flies to Britain on 18 May for a 70-day relay around the UK.
Locog Chairman Lord Coe, International Olympic Committee president Jacques Rogge and Hellenic Olympic Committee president Spyros Capralos were in Olympia for the moment marking the countdown to London 2012.
Lord Coe told the BBC: “Today is the rallying call to the athletes – the best athletes of their generation – to come to London. That in itself is a big moment because it’s the biggest sporting event in the calendar.”
The lighting ceremony took place in front of the ruins of the Temple of Hera.
The flame – an Olympic symbol meant to represent purity because it comes from the sun – was then placed in an urn and is taken to the stadium where the ancient Olympic Games were staged.
There, it will light the London 2012 torch of Liverpool-born Greek world champion 10km swimmer Spyros Gianniotis, who will carry it on the first leg of the relay around Greece.
He will pass it on to Alex Loukos, 19, the first British torchbearer, a boxer and, in 2005, one of a delegation of east London schoolchildren who travelled to Singapore as part of London’s final bid for the Games.
The torch is due to travel 2,900kms (1,800 miles) through the country, carried by 500 torchbearers, on a route circling the country and travelling out to Crete.
The 2012 flame will travel straight from Greece to the UK on 18 May, flying into the Royal Navy airbase at Culdrose, near Helston in Cornwall.
The UK torch relay begins at Land’s End the following morning when three times Olympic gold medal-winning sailor Ben Ainslie will be the first to carry the torch on British soil.
Carried by 8,000 torchbearers, the Barber Osgerby-designed torch will cover 8,000 miles across all of the country’s nations and regions.
It is due to reach the Olympic Stadium in Stratford on 27 July to light the cauldron at the opening ceremony of the Olympic Games.