Those present remembered him as a fearless warrior and bold leader who devoted his life to protecting his country's security.
US vice-president Joe Biden and former Prime Minister Tony Blair headed the long list of visitors who gathered outside Israel's parliament building in Jerusalem for the ceremony.
Mr Sharon's body was then taken from the Knesset to his farm in southern Israel for burial.
President Shimon Peres, a long-time friend and sometimes rival of Mr Sharon, said in his eulogy: "Arik was a man of the land. He defended this land like a lion and he taught its children to swing a scythe.
"He was a military legend in his lifetime and then turned his gaze to the day Israel would dwell in safety, when our children would return to our borders and peace would grace the Promised Land."
Mr Sharon died on Saturday, eight years after a stroke left him in a coma from which he never recovered. He was 85.
He spent most of his life battling Arab enemies and promoting Jewish settlement on war-won lands. His backers called him a war hero. His detractors, first and foremost the Palestinians, considered him a war criminal and held him responsible for years of bloodshed.
But in a surprising about-face, he led a historic withdrawal from the Gaza Strip in 2005, uprooting all soldiers and settlers from the territory after a 38-year presence in a move he said was necessary to ensure Israel's security.
Prime Minister Benjamin Netanyahu, who resigned from Mr Sharon's government in protest at the Gaza withdrawal, said: "I didn't always agree with Arik and he didn't always agree with me." Nevertheless, he called Mr Sharon "one of the big warriors" for the nation of Israel.
Mr Biden also talked about his decades-long friendship with Mr Sharon.