World celebrities gathered at a leafy promenade turned into a catwalk for the firm's Cruise collection, even though Chanel goods are not sold in Cuba.
Ordinary Cubans were held behind police lines around the event venue, and many voiced their frustration.
The show is the latest sign in Cuba's warming relations with the West.
Earlier this week, a US cruise ship docked in Havana after sailing from Florida - the first such crossing in more than 50 years.
Cuba and the US restored diplomatic relations last year.
Celebrities - including actor Vin Diesel and supermodel Gisele Bundchen - attended the show at the Prado promenade to see Chanel's leading designer Karl Lagerfeld displaying the new collection.
Lagerfeld said the line was inspired by Cuba's "cultural richness".
But Havana residents could only watch from behind the security cordon lines as VIP guests arrived at the show in specially rented antique American sedans.
"It's a shame they don't let us pass," aspiring local model Reinaldo Fonseca was quoted as saying by the Associated Press news agency.
Chanel goods would cost well beyond the average Cuban wage of $25 (Â£17) a month, the BBC's Will Grant says.
French fashion house Chanel has staged its show in the Cuban capital Havana - the first international fashion show since the 1959 communist revolution.