The charge carries a possible death penalty.
Only three low-ranking defendants were in the court - Abdullah Kadhim al-Ruwayyid, his son Mizhar and Mohammed Azzawi - as the first witness took the stand on Tuesday, testifying from behind a curtain to protect his identity.
Under the Iraqi system, the announcement of charges against Saddam and his seven co-defendants in effect puts the burden of proof on the defence to dismiss the accusations.
The charges represent the accusations that the panel of five judges believe that the evidence has supported.
Chief judge Raouf Abdel-Rahman read the charges on Monday after months of hearing prosecution witnesses describe torture at the hands of former intelligence agents and documents allegedly tying the former Iraqi leader to a crackdown against Shia in the town of Dujail in 1982, in response to a failed assassination attempt.
The first witness brought by the defence on Tuesday was a son of Abdullah al-Ruwayyid and brother of Mizhar al-Ruwayyid.
He told the court that he did not see either of the defendants with security forces that swept through the town on July 8, 1982 shooting attack on Saddam's motorcade.
But the testimony turned into a shouting match between the defence lawyers and Abdel-Rahman after the judge told the witness not to refer to Saddam as "Mr President."
"What is based on falsehood is falsehood"
Saddam's defence team
Chief defence lawyer Khalil al-Dulaimi said: "We express our rejection over the court's interference in the witness's choice of words."
The defence team is insisting that Saddam Hussein is the legitimate president of Iraq despite the US-led invasion.
"What is based on falsehood is falsehood," al-Dulaimi said, referring to defence arguments that the court is illegitimate because it was created under the US military in Iraq.
Abdel-Rahman told the defence lawyers that "this is a pure criminal case, we don't have anything to do with politics. Your witness is a simple man with nothing to do with politics who is here to try to show your clients' innocence. Ask him questions."
The two al-Ruwayyids and Azzawi sat silently during the testimony, frowning and looking glum.
The three former local officials in the former ruling Baath Party are accused of informing on al-Dujail residents after the assassination attempt, leading to the death of some of those they pointed out to security forces.
Since the trial began, the defendants have tried to dismiss the court as illegitimate.
Saddam on Monday refused to enter a plea to the charges and said he remained Iraq's president. Abdel-Rahman entered a not-guilty plea on his behalf, and the other defendants pleaded innocent.
The other main defence argument has been that the crackdown was a legal response to the shooting attack against Saddam, carried out by members of the Iranian-backed Shia al-Dawa Party, to which the outgoing Iraqi prime minister, Ibrahim al-Jafari, belongs.
Saddam Hussein refused to
enter a plea
But in reading the charges, Abdel-Rahman appeared unconvinced by the argument. He noted that women and children died in the crackdown - reading their names repeatedly as he recited the charges against each defendant.
The prosecution has argued that the crackdown went beyond the perpetrators of the shooting to punish the entire population of al-Dujail.
US officials observing the court have said a verdict could come in August. If sentenced to death, the defendants would have the opportunity of appeal - raising the possibility of further months of legal proceedings.