The left-leaning newspaper previously had a blue and white masthead and in 2005 had adopted a Berliner format, midway between a broadsheet and a tabloid.
"Our move to tabloid format is a big step towards making The Guardian financial sustainable," the paper's editor-in-chief Katharine Viner said in a piece for the first new edition.
She called it "bold, striking and beautiful".
Speaking at the relaunch, she vowed that "Guardian journalism itself will remain what it has always been: thoughtful, progressive, fiercely independent and challenging; and also witty, stylish and fun."
The Guardian is selling or scrapping its three presses worth $110 million to cut costs and printing will be outsourced to tabloid-format presses run by Trinity Mirror media group.
The website, which attracts 150 million monthly unique browsers worldwide, has also undergone a redesign.
The company is aiming to break even by April 2019, mainly through cutting costs and boosting digital ad revenue to make up for a sharp decline in print ad revenue.
The first tabloid edition's main front-page photograph was of Chelsea Manning, the whistleblower whose leaked diplomatic cables were published by the Guardian, and who is now running for the US Senate.
"From one tabloid to another, here is our suggestion for them to turn around their failing fortunes: actually report some exclusive, rip-roaring stories ... We know that is an alien concept to them, but it might help them flog a copy, or two," said the editorial of the Rupert Murdoch owned paper.
But right-wing politician Patrick O'Flynn, former political editor of the Daily Express, complimented the new design, tweeting "I really like the look of the new tabloid Guardian. Well done the design team."
The newspaper's aggressive expansion into the US and Australian markets, which involved the hiring of a large staff, and its commitment to free online content resulted in a huge profile-boost on the global stage and a Pulitzer Prize, but also huge financial losses.
The Guardian lost GBP 163;44.7 million in the year ending April 2017, following losses of GBP 63;68.7 million the previous year.
The Scott Trust, which owns the paper, had over GBP 163;850 million in its investment fund after selling one of its most popular publications in 2013, which was meant to guarantee the paper's independence and ethos without compromising to market forces.
However, the scale of the losses has forced the paper to cut costs, with around 300 job losses.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)