Gilliam, Monty Python veteran and director of films such as Brazil and 12 Monkeys, was in the Bavarian capital to open the festival, which will screen more than 200 films.
At least 60,000 people are expected to attend the festival, which runs until July 4 and will include several of world- and German-premieres.
Festival organiser Andreas Ströhl praised Gilliam's new film as an “overpowering hallucinogenic fantasy” and a “children's film for adults.”
Ledger died of an accidental overdose during filming and his part had to be finished by Johnny Depp, Jude Law and Colin Farrell.
The film tells the story of a magical wandering circus whose owner has promised his daughter to the devil in return for ever-lasting youth. Ledger played the hero trying to rescue the daughter through various parallel realities.
Starring Christopher Plummer, Tom Waits, Verne Troyer and Lily Cole, the film opens in German cinemas on December 3.