Xolile Mngeni denied charges of murder, kidnapping, robbery and illegal possession of a firearm and ammunition at the Cape High Court after being cleared as fit to stand trial last week despite his brain tumour.
"I confirm the plea as given by my client," said defence lawyer Qalisile Dayimani, who said the state had to "prove each and every allegation".
Mngeni was named by a co-accused, who pleaded guilty last week to Dewani's murder, as the gunman in the killing of the 28-year-old in November 2010 in a plea bargain that implicated her husband Shrien Dewani.
Mziwamadoda Qwabe said Mngeni had fired a single fatal shot from the front passenger seat. He claimed the pair were recruited by the couple's driver to carry out the paid hit allegedly on Dewani's orders.
Mngeni has a brain tumour which a medical report said will not affect proceedings.
He answered not guilty pleas to five charges after entering the court with a walking frame and hiding his face.
Prosecutors are still hoping to put Dewani, a British businessman, in the dock in Cape Town after his extradition process was temporarily halted earlier this year, said prosecuting authority spokesman Eric Ntabazalila.
"Our hope was to get all three of them on the stand," he said.
"We are hopeful that in the end he will come to South Africa and answer to the allegations put to him."
The state is hoping that the trial will be wrapped up in around four weeks, said Ntabazilila.
Qwabe and the driver Zola Tongo will testify as state witnesses after both entered plea bargains that accused Shrien Dewani of orchestrating his wife's death as a botched hijacking.
Qwabe was sentenced to 25 years in prison. He was the second accused to incriminate Dewani in the killing, after the driver entered his own plea in 2010 and is serving 18 years in prison.
Britain approved Dewani's extradition but the London High Court shelved the process in March, citing health grounds with his lawyers saying he suffers from severe post-traumatic stress disorder and depression.
Dewani has denied any involvement in the contract killing of his Swedish wife.