Waving colourful flags, dancing and chanting, the crowds marched onto Taksim square, the hub of the sprawling city of almost 15 million people, for a rally organized by four trade union confederations.
About 38,000 police were deployed for the occasion, searching demonstrators before allowing them into the square, which had been equipped with giant digital screens and loudspeakers.
Snipers were positioned on buildings around the square.
Until May Day last year, Taksim square had been declared off-limits since the bloodshed during a 1977 May Day rally when gunmen, believed to be far-right militants aided by members of the intelligence services, fired on a peaceful crowd, killing 33 people and triggering mass panic.
The attackers were never caught.
The deaths came at a time of heightened political tensions and street violence between leftist and rightist militants in Turkey, which culminated in a military coup in 1980.
The government's decision reopen the square for May Day celebrations came after parliament reinstated the day as a national holiday in 2009.
In the years before that change, unionists trying to hold rallies on Taksim square in defiance of the ban were repulsed by police action that injured dozens and saw hundreds detained.
As Sunday's rally got underway, trade union leaders left red carnations on the spot where the crowd was fired on, urging authorities to shed light on the killings.