Workers were still putting the finishing touches to the building in the Karrada district of Baghdad, which opened its doors free of charge for an afternoon show dubbed Monodrama that runs until 3 April.
The festival was the third cultural event to take place at the theatre since the fall of Saddam Hussein's government, said Fathi Zain al-Abidin, head of theatre and cinema at the culture ministry.
"We in the culture ministry are trying to make the Iraqi intellectuals play a vital role in creating the new cultural life for the new Iraq," Zain al-Abidin said before the show got under way.
"Professional and young actors should work hand in hand to create a new reality," he said.
For 90 minutes, dancers, singers and musicians went on the stage to present a fare of traditional folklore that was followed by a play depicting the successive wars that have plagued modern-day Iraq.
A trickle of applause accompanied each performance in the 1000-seat theatre, where only one third of the seats were filled.
"The situation is still very complicated. It is difficult to start living culturally again," said Iraq's interim culture minister, Mufid al-Jazairi, to explain the low attendance.
Stage fright: Bombings have left
potential theatregoers nervous
Numerous bombings, gunfire attacks and armed robberies have shaken Baghdad since the collapse of the government last April, robbing residents of a normal life after office hours.
Baghdadis prefer to stay indoors and avoid public gatherings. And for many, who lived under the oppression of Saddam, culture is still a mysterious notion, according to Jazairi and at least one theatregoer.
"This is the first time I've come to the theatre to see a live performance. We never did that before," said Salwan, who declined to give his surname.
Jazairi squarely blamed it on Saddam.
"Saddam had an anti-culture policy. We hope the Iraqi theatre will rise up after decades of pressure and limitations," he said.
"The theatre under Saddam was a commercial theatre with very low cultural values," he added.
Actors and employees of the culture ministry, meanwhile, stormed the stage before the start of the performance carrying banners demanding better pay and working conditions.
The messages said: "No to the marginalisation of Iraqi artists. No to the marginalisation of culture in Iraq."
Again Jazairi blamed it on Saddam.
"We inherited the funding system of the older regime. We did not set the guidelines," Jazairi told the protesters, adding that he would urge the US-picked Governing Council to review the situation.
Ayad Ahmad, 22, one of the two men who acted in the play, said he rehearsed for six months without earning a penny.
"We love to act so we did it for free," he said.