Genesis II is an inflatable module designed and launched by Bigelow Aerospace, a private company founded by an American hotel tycoon.
The inflatable and flexible core of the spacecraft expands to form a bigger structure after launch.
Billionaire Robert Bigelow hopes to use inflatable technology to construct a manned space station by 2015.
Inflatable spacecraft are attractive because they take up less space on their launch vehicle than solid components and therefore cost less to place into orbit.
Genesis II was launched onboard a Russian rocket, and successfully separated from its launch vehicle 14 minutes after lift-off, engineers said.
Communications were established with the craft after a short delay, before the module beamed back a series of images of its expanding solar panels.
Officials said the craft was functioning well, with communications and air pressure as expected.
Bigelow Aerospace - slogan: Getting you excited again about space - hopes to build a full-scale space hotel, dubbed Nautilus, which will link a series of inflatable modules together like a string of sausages.
Genesis II is a 15 ft (4.5m) module designed to expand to a diameter of 8ft (2.4m).
Onboard the company has sent a collection of pictures and other memorabilia from fee-paying customers keen to see their personal possessions photographed in space.
The company also hopes to activate a space-based bingo game to be played by people back on Earth.
Later this year it plans to launch another module, Galaxy, described as a halfway house to a human-habitable space module.
Founder Robert Bigelow has invested some $500m (£250m) in his project, which is vying with Sir Richard Branson's Virgin Galactic enterprise to take fee-paying customers into space.
But experts say the costs of commercial space travel need to come down before it can be a success.
As a result, Mr Bigelow is offering a $50m prize to anyone who can design a craft capable of carrying five people to a height of 400km (250 miles) before 2010.