The free-boundary compressible one-dimensional Euler equations with moving physical vacuum boundary are a system of hyperbolic conservation laws that are both characteristic and degenerate. The physical vacuum singularity (or rate of degeneracy) requires the sound speed equation image to scale as the square root of the distance to the vacuum boundary and has attracted a great deal of attention in recent years. We establish the existence of unique solutions to this system on a short time interval, which are smooth (in Sobolev spaces) all the way to the moving boundary. The proof is founded on a new higher-order, Hardy-type inequality in conjunction with an approximation of the Euler equations consisting of a particular degenerate parabolic regularization. Our regular solutions can be viewed as degenerate viscosity solutions. © 2010 Wiley Periodicals, Inc.