The funeral was attended by the Queen Elizabeth II, two heads of state and 11 serving prime ministers, among more than 2000 people in the cathedral.
The procession brought London city to a standstill this morning as military personnel and members of the public lined the streets amid a light drizzle to pay their respects to the 'Iron Lady'.
The coffin of Thatcher, who died of a stroke at the age of 87 on April 8, was carried out of the Palace of Westminster where it had been resting overnight.
It was then loaded onto the hearse for its procession through Whitehall to St Paul's Cathedral, where 2,300 guests led by Queen Elizabeth II were assembled for the official ceremony.
There were a few protesters along the route who blew whistles and chanted "waste of money" in reference to the ceremonial funeral accorded to Britain's former Conservative party Prime Minister - the first since the funeral procession of the country's war-time PM Winston Churchill in 1965.
"I think that what is happening today is absolutely fitting and right. It is a fitting tribute to a great prime minister," said Prime Minister David Cameron in his tribute just before he was to recite a lesson from the King James Bible at St Paul's as per Lady Thatcher's wishes.
"She was the first woman prime minister, she served for longer in the job than anyone for 150 years, she achieved some extraordinary things in her life. I thought this was a very brave woman doing a very tough job," Cameron said.
Lord Karan Bilimoria, a cross-bench peer in the House of Lords and leading Indian-origin entrepreneur who is among the guests at the ceremony, described Baroness Thatcher as "the entrepreneur's prime minister".
"I saw, before my own eyes, as a student in London and at Cambridge, this country being transformed, this country being opened up and the glass ceiling being shattered," Bilimoria said.
"Margaret Thatcher herself led the way by achieving all the things she did as a woman, in smashing through the glass ceiling. Britain opened up not only to the world, with London opening up as a global financial centre, but did so with the spirit of enterprise and entrepreneurship being unleashed in the country," he said.
More than 4,000 officers are on duty during the ceremony to tackle any protesters and in the wake of the explosions during the Boston Marathon on Monday.
Altogether, around 170 countries will be represented by dignitaries such as members of royal families, politicians, and senior diplomats.
The service, a traditional affair, included a selection of well-known hymns, including Charles Wesley's Love Divine, All Loves Excelling, as well as poems by Wordsworth and T S Eliot.