The military operation, called Operation Storm, led to the recapture of Croatia's Serb-held Krajina region in 1995, crushing one of the last pockets of Serb resistance.
Between 150,000 and 200,000 Serbs were forced to flee the Krajina region to Bosnia and Serbia during the offensive in which more than 150 Serb civilians died, according to the indictment.
Tieger said the operation left "a scarred wasteland of destroyed homes and villages," as Croatian troops led by Gotovina and his co-defendants "shelled towns and villages" and caused the "panic-stricken flight" of Serb civilians.
"For those who remained, largely the elderly and the infirm, life became a nightmare. While homes and villages were plundered and destroyed on a massive scale, many were murdered."
Gotovina smiled and waved at the public gallery before the start of the trial.
He and his two co-defendants have denied all the charges.
Cermak and Markac are also accused of playing key roles in Operation Storm.
Popular support
Prosecutors say Cermak, 58, was "effectively the military governor of the area" and he tried to hide what was happening from international observers.
Markac, 52, was the assistant minister of the interior responsible for the police forces who took part in the operation.
The prosecution stressed that the men did not act alone.
Gotovina was arrested in a hotel in the Spanish Canary Islands in December 2005, after almost four years on the run.
Many in Croatia still see him as a hero who ended the 1991-1995 war in Croatia and his arrest sparked protests.
In a pre-trial brief to the judges, the general's defence said that Gotovina "ended the wars in Bosnia and Croatia" and fought against then Yugoslav leader Slobodan Milosevic and therefore deserved praise, not an indictment.
The legality of Croatia's retaking its territory is not in question.