The guests included Britain's Prince Charles, Carl XVI Gustaf and Queen Silvia of Sweden, Spain's former king and queen Juan Carlos and Sofia, and other former and current royals.
Milling crowds earlier spent hours in line to pay their last respects before the coffin, draped in the regal coat of arms, in the throne room of the palace.
It was then taken to Bucharest Cathedral for a funeral mass. The former king will be buried in the central town of Curtea alongside his father Carol II and his grandfather Ferdinand.
"We took the train this morning and came with all our love and all our heart to pay a final tribute" to the king, Mariana Bolches, who travelled 230 kilometres (140 miles) from the southeastern city of Constanta, told AFP.
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"I lived all my childhood in a building near the Royal Palace. My walk to school passed by here and I came across the king many times. I loved it so much," said Teodor Banu, with tears in his eyes.
Michael, a descendant of the German Hohenzollern dynasty, ruled Romania twice, from 1927-1930 and then from 1940-1947, when he led a coup that ousted marshal Ion Antonescu and saw Bucharest join the allied forces against Hitler.
But the postwar communist government ended the monarchy in the Balkan country and Michael was forced to abdicate and go into exile in December 1947.
"I really appreciated his modesty... and above all his extraordinary patriotism," said Andreea Ileana, holding a giant bouquet of white flowers.
Stripped of his citizenship, he eventually settled in Switzerland, where he earned a modest living as an aircraft mechanic and farmer.
He finally returned to Romania in 2002.