It was the first mosque to be rebuilt in the town and organisers expect between 3000 to 7000 people to attend the inauguration.
The town was the scene of ethnic cleansing during the 1992-1995 conflict when Bosnian Muslims and Croats were forced to leave their homes by Serb forces.
The reconstruction of the mosque “is important for the reconciliation process and for cohabitation between Bosnian communities, said Ahmet Cavka, a Banja Luka Muslim leader.
Security was tight in an attempt to prevent the kind of violence that has marred previous mosque rebuilding ceremonies.
In May 2001 the Islamic community’s efforts to lay a cornerstone for rebuilding the Ferhadija mosque, also in Banja Luka, ended with anti-Muslim riots that left one person dead and about 30 injured.
The cornerstone was laid the following month, although anti-Muslim riots again broke out.
No Bosnian Serb official was present at Saturday’s inauguration.
The Muslim community in the town says all 16 mosques that previously stood there were destroyed.
In all, 106 mosques were reduced to rubble in what is today Republika Srpska, RS during the four-year conflict.
The RS, along with the Muslim-Croat federation are two semi-autonomous enclaves in Bosnia-Hercegovina that were created following the Dayton peace accords.