The Mecca Clock, which Riyadh says is the world's largest, has four faces measuring 43 metres in diameter.
It sits 400 metres up what will be the world's second-tallest skyscraper and largest hotel, overlooking the city's Holy Grand Mosque, which Muslims around the world turn to five times a day for prayer.
"The Holy Mecca Clock started with the order of King Abdullah bin Abdulaziz Al-Saud ... one minute after 12am this morning, the first day of the holy month of Ramadan," Saudi state news agency SPA said.
The clock tower is the landmark feature of the seven-tower King Abdulaziz Endowment hotel complex, being built by the private Saudi Binladen Group, which will have the largest floor area of any building in the world when it is complete. Local media have said the clock tower project cost US$3 billion (NZ$4.2 billion).
The clock is positioned on a 601-metre tower, which will become the second tallest inhabited building in the world when it is completed in three months' time.
"Because it based in front of the holy mosque the whole Islamic world will refer to Mecca time instead of Greenwich. The Mecca clock will become a symbol to all Muslims," said Hashim Adnan, a resident of nearby Jeddah who frequently visits Mecca.
The project is part of efforts to modernize the old city and make it more capable of catering to pilgrims. Around 2 million Muslims visit the city each year for the annual Haj pilgrimage, a once-in-a-lifetime requirement for able-bodied Muslims, and 3.5 million pilgrims visit Mecca at other times of the year.
While many in Saudi Arabia are celebrating the clock tower's launch, some Mecca visitors are critical of how it will affect the ambiance of the Prophet Muhammad's birthplace. The complex is built on the land once occupied by an Ottoman fortress.
"I think they are trying to do a lot of luxurious development around the Grand Mosque which is taking away from the spiritual atmosphere of the place, making it more modern," said Lina Edris, a frequent visitor to Mecca.
"The clock tower is higher than the minarets of the Grand Mosque, which will take attention away from the mosque even though it is obvious the mosque is more important," she added.