AbstractThe 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 $c^2= \gamma \rho^{ \gamma -1}$ 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.