Sky beat Movistar by the slimmest of margins, taking the stage win by 0.4 of a second on the finish line in Ourense, north-west Spain. Chris Froome, who leads the Sky squad's GC campaign, crossed the line as the team's fifth man while fellow Brit Kennaugh crossed first.
That gave the two-time British champion the overall lead, making him the seventh rider from Great Britain to wear the leader's jersey in the Vuelta. Michael Wright, Robert Millar, David Millar, Mark Cavendish, Chris Froome and Sir Bradley Wiggins are the other riders to lead the Grand Tour in the past.
Etixx-Quick Step set the early benchmark on the hilly 27.8km course, as they became the first team to break the 31-minute barrier with a time of 30-59.
BMC were next to break into the lead with a formidable looking time of 30-44 from the TTT world champions, but that short-lived as Orica-BikeExchange set 30-43.
Movistar, who come to the race with the duel leadership of Nairo Quintana and Alejandro Valverde, looked marginally off the pace in the opening half of the race but made up time in the closing section, setting what looked like the winning time of 30-37.
But Sky, who were the penultimate team off the start ramp, managed to sneak in just inside that time by less than half a second, with Froome desperately holding onto the back of his teammates as they crossed the line.
Alberto Contador's Tinkoff, who were the final team to start, may leave the first stage disappointed as they leave their leader and three-time winner of the Vuelta with a deficit of 52 seconds to make-up to Froome, Quintana and Valverde.
Things didn't go swimmingly for Astana either on the course, as they lost time after their team leader Miguel Angle Lopez dropped his chain early in the race, but the Kazakh team were still able to sneak inside the top-10 with a 58 second deficit to the winners.
But the day belonged to Sky and 27-year-old Kennaugh, who is riding the seventh Grand Tour of his career and his third Vuelta, will now start the second stage, which will take in 160.8km from Ourense Thermal Capital to Baiona, in the red leader's jersey.
Vuelta a España stage one, Ourense, Laias Health Resort - Castrelo de Miño (27.8km team time trial):
1. Team Sky (GBr), in 30-37
2. Movistar (Esp), at same time
3. Orica-BikeExchange (Aus), at 6s
4. BMC Racing (USA), at 7s
5. Etixx-Quick Step (Bel), at 22s
6. Trek-Segafredo (USA), at 50s
7. Cannondale-Drapac, at 52s
8. Tinkoff (Rus), st
9. Bora-Argon 18 (Ger), at 57s
10. Astana (Kaz), at 58s
General classification after stage one
1. Peter Kennaugh (GBr) Team Sky, in 30-37
2. Salvatore Puccio (Ita) Team Sky
3. Michal Kwiatkowski (Pol) Team Sky
4. Leopold König (Cze) Team Sky
5. Chris Froome (GBr) Team Sky
6. Alejandro Valverde (Esp) Movistar
7. Jonathan Castroviejo (Esp) Movistar
8. Ruben Fernandez (Esp) Movistar
9. Jose Joaquin Rojas (Esp) Movistar
10. Nairo Quintana (Col) Movistar, all same time
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