Mayor Giuliano Pisapia watched as a hydraulic crane attacked the derelict seven-storey building, leading a round of applause as debris flew off the concrete edifice.
The building, dubbed by locals the "Ecomonster", had been an eyesore for more than 20 years.
"Today is a day of joy for the people of Milan. We are taking back this precious land occupied by the Ecomonster and we are giving it back to the city and its citizens," Pisapia said.
The demolition is expected to take up to 20 days before work starts to make way for a park area.
Left-leaning Pisapia took office last year. Before him, Milan had been a right-wing stronghold of former Prime Minister Silvio Berlusconi.
Environmentalists from Italy's prominent Legambiente group welcomed the break-up of the hotel, waving flags in support. (Reporting by Philip Baillie; Editing by Andrew Roche)
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