The Aladza Mosque in Foca was targeted at the start of the conflict as part of plans by Bosnian Serb forces to create an ethnically pure state.
The 16th Century mosque was considered a masterpiece of Ottoman architecture.
The restoration project has taken several years, with financial help from countries including Turkey.
The mosque was built around 1550 – where it stood until it was blown up by dynamite.
In 2018, a former Bosnian Serb soldier was charged for his part in planting the explosives.
Original parts of the mosque’s stonework, which were dumped after its destruction, have been excavated.
Thousands of Muslims attended the mosque’s reopening in Foca – where a total of 12 mosques were destroyed during the conflict.
Before the war, Muslims made up more than half the town’s 41,000 population – but now little more than 1,000 live there, Reuters news agency reports.
Foca became notorious for the mass persecution and killings of non-Serbs that took place there during the conflict.
During the war, it was renamed Srbinje – but in 2004 Bosnia’s top court ordered the reinstatement of its original name.
Members of Bosnia’s Islamic Community have praised the reopening of the historic site.
“Today we are witnessing a hope that people will again find peace at this place,” the groups head, Husein Kavazovic, said at the ceremony.
Turkish Culture Minister Mehmet Nuri Ersoy said the re-opening demonstrates that “racism and hatred can make material damage but cannot destroy culture of coexistence nourished for centuries”.
The US special envoy to Bosnia said the building would now serve as a “beacon of reconciliation for future generations”.