The Kurdistan Workers Party, or PKK, announced in May that it would disband and renounce armed conflict, ending four decades of hostilities.
The move came after PKK leader Abdullah Ocalan, who has been imprisoned on an island near Istanbul since 1999, urged his group in February to convene a congress and formally disband and disarm.
Ocalan renewed his call in a video message broadcast Wednesday, saying, "I believe in the power of politics and social peace, not weapons."
Most journalists were not allowed at the site of Friday's ceremony.
The PKK issued a statement from the fighters laying down their weapons, who called themselves the "Peace and Democratic Society Group", saying: "We will henceforth continue our struggle for freedom, democracy, and socialism through democratic politics and legal means."
The ceremony took place in the mountains outside the city of Sulaymaniyah in northern Iraq's semi-autonomous Kurdish region.
The state-run Iraqi News Agency reported that "the process will take place in stages, with a group of party members initially laying down their weapons symbolically".
The disarmament process was expected to be completed by September, the agency reported.
An Iraqi Kurdish political official said about 30 fighters took part in the ceremony, in the presence of representatives from Turkish intelligence, the Kurdish regional government and pro-Kurdish parties from Iraq and Turkey.
A senior Turkish official confirmed that a laying down ceremony took place, describing it as a "milestone of the third stage" in a five-phase peace process.
Turkey remained committed to peace, stability and reconciliation," the official said.
In Turkey, Devlet Bahceli, President Recep Tayyip Erdogan's nationalist ally who initiated the peace process, welcomed the development.
"Starting today, members of the separatist terrorist organisation have begun surrendering their weapons in groups, marking historic developments that signal the end of a dark era," Bahceli said in a statement.
Bahceli, who has traditionally maintained a hardline stance against the PKK, had surprised everyone in October when he suggested that Ocalan could be granted parole if he renounced violence and disbanded the PKK.
The PKK has waged an armed insurgency against Turkey since 1984, initially with the aim of establishing a Kurdish state in the southeast of the country - an objective that evolved into a campaign for autonomy and rights for Kurds within Turkey.
The conflict between militants and state forces, which has spread beyond Turkey's borders into Iraq and Syria, has killed tens of thousands of people.
The PKK is considered to be a terrorist organisation by Turkey, the United States and the European Union.
Previous peace efforts between Turkey and the PKK have ended in failure - most recently in 2015 - leading to the resurgence of violence.
