The ferry, the Sewol, was structurally unsound, overloaded and travelling too fast on a turn when it capsized and sank during a routine voyage off the southwest coast on April 16, 2014.
Bereaved families have been calling for the ship to be raised and for a more thorough investigation into the disaster. Officials also hope to find the last nine missing bodies.
Salvagers started to bring up the vessel, which has been lying on its side at a depth of 44 metres (144 feet), late on Wednesday, and worked through the night.
Television pictures taken from the air early on Thursday showed the white 140-metre (460-foot) long hull, coated in mud and sediment, breaking above the surface, flanked by winching barges.
"The work needs to be done very cautiously," Lee Cheol-jo, an official at the Ministry of Ocean and Fisheries, which is in charge of the operation, told a briefing.
A Chinese salvage company has fitted 33 beams beneath the hull with 66 hydraulic jacks inching the ship up.
Salvage workers in orange overalls and white hard-hats clambers over the hull fixing cables. The name Sewol could just be made out through the grime.
Lee said the ferry would be raised as high as 13 metres above the sea and then moved onto a semi-submersible vessel. That operation was expected to take until Friday and it would then be taken to a nearby port, but that could take up to 12 or 13 days, he said.
Once the sunken ferry had been secured on the semi-submersible vessel, bereaved families would be allowed to observe from a closer distance, another official said.
Of those killed, 250 were teenagers from the same high-school, many of whom obeyed crew instructions to remain in their cabins even as crew members were escaping the sinking ship.
The father of one victim said he would not feel assured until the ship was safely on land.
"The ministry should hurry to recover the missing as a top priority," Yoo Kyung-keun, who also heads a families association, said in a statement.
The botched rescue and toll of children in one of Asia's most technically advanced economies shocked and angered the country, with former President Park Geun-hye and her administration the focus of much of the ire at the time.
Park denied accusations that she failed to act decisively but for many South Korans, she has never fully explained what she was doing during the seven hours between the first news reports and her first television appearance that day.
Her response to the disaster was again raised in recent months after she came under suspicion in the course of an investigation into a corruption scandal that led to her dismissal from office on March 10.
The salvage is costing about 85 billion won ($75 million), another ministry official said this week.
(Reporting by Ju-min Park; Editing by Robert Birsel and Michael Perry)
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)