The probe, painted with the Indian flag, touched down at 2034 (1504 GMT), the Indian Space Research Organisation (ISRO) said.
It will perform various experiments, including measuring the composition of the Moon's atmosphere.
The mission is regarded as a major step for India as it seeks to keep pace with other space-faring nations in Asia.
The BBC's Sanjoy Majumder in Delhi says the success of the mission has been hailed in India where many see it as another sign of the country's emergence as a global power.
Earlier this week Chandrayaan 1 began orbiting the Moon some three weeks after it was launched from a space centre in southern India.
The dropping of the Moon Impact Probe (MIP), weighing about 30kg, concludes the first phase of the mission.
"During its descent from Chandrayaan 1, an onboard video camera transmitted lunar pictures to the ISRO command centre," spokesman S Satish said, AFP news agency reports.
In the days to come, the probe will measure the composition of the Moon's ultra-tenuous atmosphere, or exosphere.
For the next two years, Chandrayaan 1 will map a three-dimensional atlas of the Moon and also check for the presence of water-ice with the help of instruments built by India and other countries including the US, Britain and Germany.
The chairman of India's space programme, Madhavan Nair, has described the mission as 95% successful so far and has announced a second lunar mission to be launched by 2012.
"We have now successfully put our national flag on the lunar surface," he told a news conference.
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