The monument, taken down in front of cheering protesters, will be stored for “safe keeping”, UCT’s council said.
Students have been campaigning for the removal of the statue of the 19th Century figure, unveiled in 1934.
Other monuments to colonial-era leaders have also been the target of protest in South Africa.
The BBC’s Mohammed Allie told Focus On Africa radio that there was a “festive atmosphere” as students, academics, members of political parties and ordinary Cape Town residents came to witness a “historic moment for South Africa”.
The crowd cheered as the statue was being lifted of its plinth. Once it was removed some students jumped on it and started hitting it with wooden sticks and covering the face with plastic.
When the crane removed the Cecil Rhodes statue, it was a huge victory for black South Africans fed up with a lack of education and job opportunities more than 20 years after apartheid ended.
“We finally got the white man to sit down and listen to us,” said a student who had campaigned for it to be taken down. Some were chanting “one settler; one bullet” – a sign that anger could boil over if the lives of black people do not improve.
There was a mixed crowd watching – with many white academics and students also supporting its removal.
But the whole affair serves as a wake-up call to South Africans to tackle racial inequality. People point to the fact that at the University of Cape Town there are only five black South African-born professors.
The “Rhodes Must Fall” campaign began in March after activist Chumani Maxwele smeared excrement on the statue as a protest against Rhodes’ racism and its legacy at UCT.
The protesters said that the statue had “great symbolic power” which glorified someone “who exploited black labour and stole land from indigenous people”.
The campaign led to the university’s 30-member council voting on Wednesday for the statue’s removal.
The council defended the decision saying it had canvassed the views of students, academic staff, alumni and the public before coming to a conclusion.
“This is exactly how a university should work and we believe is an example to the country in dealing with heritage issues,” it added.
The campaign has triggered attacks on other statues around the country seen as representing South Africa’s racist past.
But it has also led to a backlash with some white South Africans rallying to protect the statues of the 19th Century president Paul Kruger in the capital Pretoria, and 17th Century colonialist Jan van Riebeeck in Cape Town.
Kruger, a contemporary of Rhodes, was an Afrikaner leader known for his opposition to the British in South Africa. Van Riebeeck was a Dutch coloniser who arrived in South Africa on 5 April 1652.
South Africa’s leftwing Economic Freedom Fighters party has backed the campaign to remove the statues.
Government officials have condemned the attacks on statues, and say a decision on their future will be taken only after consulting all groups.