As of 1 January 2018, adults aged over 21 can possess up to an ounce (28 grams) of cannabis and can grow up to six marijuana plants at home.
Opponents say the law will lead to more driving under the influence of the drug and introduce young people to drug use.
On the other hand, business is eyeing what could be an industry worth tens of billions of dollars over the next few years.
Californians voted in favour of Proposition 64 legalising cannabis 14 months ago, in a poll that took place alongside the US presidential vote.
Since then, a complicated patchwork of taxes and regulations has been drawn up to govern sales of the drug.
Troy Dayton, the CEO of Arcview, a company that analyses the global cannabis market estimates the illegal cannabis market is currently worth an annual $5.1bn (£3.8bn) and once legalised could be worth $5.8bn by 2021.
Legal buyers in the newly created “adult use” market will also now have to pay state, sales and municipal taxes which it is estimated will generate $1bn per year.
They will be prohibited from consuming the drug in public places, with 1,000 feet (300m) of a school or while driving. The US federal government still classifies marijuana alongside heroin and cocaine as a proscribed substance.