President Yoweri Museveni has launched the Kayoola Bus at Kampala Serena Hotel.
The bus, designed by Kiira Motors Corporation, uses solar energy.
“The government is committed to supporting scientists,” the president said at the launching ceremony.
“We are going to provide UGX500 billion for the Innovation Fund, which will support such projects.”
He said such innovations expose people who say Uganda’s education has been watered down.
“I wish the opposition leaders had been invited here to see this for themselves.”
“This is the best way to go with clean energy much as we earn income from other sources of energy,” the president added.
The solar-powered bus is the first in Africa has been driven in public.
Kiira Motors’ Kayoola prototype electric bus was shown off at a stadium at the start of the month.
One of its two batteries can be charged by solar panels on the roof which increases the vehicle’s 80km (50 mile) range.
Kiira Motors’ chief executive Paul Isaac Musasizi told BBC News that he had been “humbled” by the large and positive reaction to the test drive.
Musasizi hopes that it will generate employment, predicting that by 2018, more than 7,000 people could be directly and indirectly employed in the making of the Kayoola.
But backing from international companies, which make vehicle parts, is essential for the project to take off.
The vision is that by 2039 the company will be able to manufacture all the parts and assemble the vehicle in Uganda.
The 35-seat bus is intended for urban areas rather than inter-city use because of the restrictions on how far it can travel.
If it is mass produced, each bus would cost up to $58,000 (£40,000), which Mr Musasizi says is a a competitive price.
Kiira Motors grew out of a project at Uganda’s Makerere University, which is now a shareholder in the company, and it has also benefitted from government funding.
Additional source: BBC