Prince Charles pays his respects at the Cenotaph
The service was the first of a series of events around Britain to commemorate VE Day - proclaimed on May 8, 1945.
Parades, street parties and church ceremonies were also held and there will be a special BBC VE Day concert in Trafalgar Square this evening.
At lunchtime, about 2,300 servicemen marched through Hyde Park.
The prince was accompanied by the Duchess of Cornwall at the 81st annual parade and service of the Combined Cavalry Old Comrades Association at the park's Cavalry Memorial.
He laid a wreath at the memorial before attending an open air service at the bandstand.
Neville Gillman, 87, from Chesham, Bucks, a former Desert Rat, who is now president of the Sharp Shooters' Yeomanry Association, said it was a "moving occasion".
"This lady came up to me and said 'I just want to take this opportunity to thank you'. What can you say. We just did what we had to do," he added.
European tribute
Ceremonies are also being held across Europe to mark the anniversary.
US President George W Bush led commemorations at the US military cemetery in the Netherlands, where 8,000 American servicemen are buried.
A service also took place at Berlin Cathedral in Germany and French President Jacques Chirac attended a ceremony on the Champs-Elysees in Paris, where he handed out medals to veterans.
Around 265,000 British servicemen and women were killed in World War II, and tens of thousands of civilians died in the Blitz.
The Royal Artillery Band played during the earlier Cenotaph service, which was led by Bishop to the Armed Forces David Conner, and attended by former servicemen.
Every person in the United Kingdom who values their freedom should mark VE day
James, UK
VE Day: Your comments
Some veterans, who travelled from all over the country to attend the event, were disappointed that the Queen and Tony Blair did not pay their respects at Whitehall.
Jack Bruce, 85, of Edmonton, north London, a former glider pilot who served in the D-Day landings and in Arnhem, was expecting a large-scale national celebration.
He said: "It's not good having something on such a small scale like this. If we don't have proper memorials the younger generation will never understand what we went through.
"They'll have no idea of what it means to be at war."
Peter Watson, 84, who fought for the Black Watch in France and Italy was disappointed at the small number of people present at the Cenotaph.
"The word 'appreciation' keeps coming into my mind of the enormous effort that the whole country made to win that war," he said.
"It has no impact on people's minds today, or very little, and that is a great loss."
Better parade
But a spokesman for the Royal British Legion said it was satisfied with the memorial plans and stressed that the Queen is due to lead further celebrations later in the year.
"Even as late as the end of last year there weren't going to be events today, simply on 10 July," he said.
"Veterans said that wasn't acceptable and that they wanted the day to be marked. "
We will not repeat the mistakes of other generations - appeasing or excusing tyranny, and sacrificing freedom in the vain pursuit of stability
President Bush, in Latvia
Scots mark anniversary Welsh veterans remember Service held in NI
At 2000 BST a Dakota DC3 will fly at 1,500 feet over Big Ben, Whitehall and Trafalgar Square.
The flight by the plane, from the Battle of Britain Memorial Flight based at RAF Coningsby, Lincolnshire, will signal the start of the concert, headlined by Will Young and Katie Melua. "Forces' sweetheart" Dame Vera Lynn will make a guest appearance.
Up to 15,000 people are expected to gather in Trafalgar Square for the free event, called A Party to Remember.
There will also be footage screened of the original Trafalgar Square VE Day celebrations from 8 May 1945.
The concert, organised by the Royal British Legion, the BBC and London mayor Ken Livingstone, will also be shown live on giant screens in Birmingham, Liverpool, Manchester and Hull.
Guernsey visit
The Queen will also lead a day of national remembrance on 10 July - designated as the principal day of commemoration.
There will also be ceremonies to mark VJ Day - Victory over Japan - to be staged on 21 August.
The Queen and the Duke will visit Guernsey and Jersey on Monday to celebrate the 60th anniversary of the Channel Islands' liberation from Nazi occupation.
The Arc de Triomphe during the May 8, 2005, celebrations
Jacques Chirac and other officials
The 60th anniversary of  has been commemorated Sunday across Europe and the .

* In Germany:   and   attended a service at the Kaiser Wilhelm Memorial Church in  and a wreath-laying ceremony at the main Soviet war memorial.  VE Day is commemorated as Democracy Day in Germany, as Germans consider it to be the day when they, too, were liberated from .
* In the United Kingdom: 
** , wearing his uniform of  in the , laid a commemorative wreath at the Cenotaph.   is scheduled to attend the main commemorative ceremony to be held on July 10, 2005.
** At 19:00 UTC a Dakota DC3, from the Battle of Britain Memorial Flight based at RAF Coningsby, flew over the Palace of Westminster, Whitehall, and Trafalgar Square to mark the beginning of a televised BBC VE Day concert.
* In France:  Jacques Chirac laid a memorial wreath at the  at the .
* In the Netherlands:   and Queen  attended a memorial ceremony at a United States military cemetery near , where the  was sounded.
* In :   gave a controversial speech at a commemorative celebration of victory over fascism in , starting with "Comrades, ladies and gentlemen." He said that , a World War Two Croatian state, was "founded on crime" and is "a discrace and an insult to Croats." The role of  and  during the World War Two is still a point of debate in Croatia.
* In the United States: Former Sen.  spoke during a Sunday ceremony commemorating the anniversary of allied victory in Europe, May 8, 1945. The ceremony was held near the  in .

The 60th anniversary of  is scheduled to be celebrated in , and other successor states of the , on May 9, 2005.