Up to 580,406, UK and Commonwealth forces were killed in the six year conflict, and 67,073 civilians died in the Blitz.
The Last Post was sounded and a one-minute silence observed during the service for those who made the ultimate sacrifice.
The crowd heard prayers and readings before singing the hymn "O God, our help in ages past".
Royal Navy veteran George Broomhead said it was important for him to be there during the ceremony.
He said: "I never thought I would see this day. It is absolutely wonderful."
Mr Broomhead said that he celebrated after Prime Minister Winston Churchill announced the end of hostilities in Europe in 1945.
"I climbed on top of the lion's head in Trafalgar Square when it happened. I'll never forget it - I've never seen such joy in people's faces."
Cpt Edward Olver, a current member of the Household Cavalry, said he had been inspired to join the army by his grandfather who was a spitfire pilot in the war.
He said it was a privilege to attend the event and added: "It's a great occasion to get together to celebrate the wonderful achievements of George's generation and, again, focus on what the armed forces are doing today."
However he said the ceremony was tinged by sadness as not everybody returned home when the fighting ended.
The reception at Horse Guards Parade was hosted by the Royal British Legion.
On Monday, a commemoration gala concert will be held at the Royal Albert Hall in aid of the British Red Cross.
It was absolutely fantastic, unforgettable, I'd never seen so much jubilation - it went on for hours
Elsewhere in Europe, French President Nicolas Sarkozy laid a wreath at the statue of General Charles de Gaulle near the Champs Elysee, and on Sunday Russia will hold its 65th victory Parade in Moscow's Red Square.
The ceremony, renowned for its show of military might, has British presence for the first time after Number Two Company of the 1st Battalion Welsh Guards were invited to take part with troops from other nations who fought alongside Russia in the World War II.
The 71 guardsmen, accompanied by the Royal Air Force band, will be dressed in full ceremonial uniform.
This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.