Ethiopia’s Prime Minister Abiy Ahmed has spearheaded a peace process with Eritrea since he took office in April.
He signed a “peace and friendship” agreement with Eritrea’s President Isaias Afwerki on 9 July, declaring that the “state of war” was over.
The deal was signed in Eritrea’s capital, Asmara, during the first visit by an Ethiopian head of state to the country in 20 years.
Mr Isaias made a reciprocal visit to Ethiopia about a week later.
The two leaders agreed to restore diplomatic ties, and resume air and road travel.
Former Ethiopian Prime Minister Hailemariam Desalegn was among the passengers on the historic flight.
He told the BBC’s Emmanuel Igunza that he was emotional about making the trip.
“It’s a golden moment for the two countries and the two people,” he said.
Captain Yosef said he was looking forward to meeting friends in Eritrea.
“I’m going back to the place where I grew up. I’m really happy,” he told the BBC.
Ethiopia Airlines tweeted a picture of the pilots in the cockpit before take-off.
Demand was so huge that a second flight left within 15 minutes, AFP news agency reported.
Eritrea seceded from Ethiopia in 1993.
Five years later, their armies fought over disputed territory along their border.
Some 80,000 people were killed in the conflict.
A UN-backed boundary commission ruled in 2002 that Ethiopia should cede the town of Badme to Eritrea.
It refused, and the two countries remained in a state of “no war, no peace”.
Mr Abiy has promised to hand over territory, but it is unclear when this will happen.