As part of our Guaranteed Time Observer program on the Chandra X-Ray Observatory, we have an M31 observing program which has two major objectives. First to monitor the galaxy on a monthly basis to detect transient sources and follow their evolution. Second to obtain a deep image of the central region of M31 in order to measure the luminosity function and structure of this nearby Milky Way analog. Our first observation of this planned program was a 15 ksec exposure obtained in early October 1999, centered on the nucleus and using the ACIS-I imaging array of CCD's. Over 150 individual point sources are detected in this observation with a limiting flux of about 0.5x1036 ergs sec-1. A source coincident with the nuclear radio source is clearly detected and resolved from two other nearby point sources. We also detect diffuse emission from the nuclear region and have identified at least one ( 1038 ergs sec-1) new transient source (as compared with the ROSAT M31 source lists). The luminosity function, spatial distribution, and spectral properties of the nuclear region will be presented and discussed. The spectrum and luminosity of the source coincident with the radio nucleus will be compared to galactic X-ray binaries and SGR A* in an effort to determine the nature of this source.