"Thank you for making history with me," Lady Gaga told a screaming crowd on Saturday night.
The Mother Monster, as she is known, kicked off the show with her 2011 song Bloody Mary.
Cries of joy rose from the tightly-packed fans who sang and danced shoulder-to-shoulder on the vast stretch of sand.
Lady Gaga performed her classic hits, including Poker Face and Alejandro, switching between an array of dresses including one with the colours of the Brazilian flag.
Some fans - many of them young - arrived on the beach at the crack of dawn to secure a good spot, armed with snacks and drinks. They spent the day under a blazing sun, while others perched in trees, determined to get a panoramic view.
Madonna also turned Copacabana Beach into a massive dance floor last year.
The large-scale performances are part of an effort led by City Hall to boost economic activity after Carnival and New Years' Eve festivities and the upcoming month-long Saint John's Day celebrations in June.
Rio's City Hall said in a recent report that around 1.6 million people were expected to attend Lady Gaga's concert and that the show should inject at least 600 million reais ($A164 million) into Rio's economy.
Rio officials have a history of organising huge concerts on Copacabana Beach.
Madonna's show drew an estimated 1.6 million fans last year, while four million people flooded onto the beach for a 1994 New Year's Eve show by Rod Stewart in 1994. According to Guinness World Records, that was the biggest free rock concert in history.
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