Snow White was the first, but firsts tend to underwhelm. The first talking picture, "The Jazz Singer," is actually a pretty bad movie, as were most of the first silent films. Thus, Snow White gets points for actually being a good 'first,' and it is probably the closest thing to perfection that Disney has ever created. It features all the emotions, distinct personalities, and also shocks with how scary it can be at times. One can watch it and not realize it was the first animated feature ever because it is just perfect.
Pinocchio is a close second, but it has some continuity problems and other small things but when they are viewed with the whole they are not really significant, and it also has a better moral. So, basically, it's a toss-up.
I actually think Bambi belongs in the range of Snow White and Pinocchio, because it too is just about perfect, especially the artistry involved (the backgrounds in particular).
But Disney's greatest achievement is still the brilliant Fantasia.