More than 200 people were injured in the fire, which ripped through the main stand.
It is believed a spectator dropped a match or cigarette through holes in the stand on to the rubbish which had accumulated below.
The stand was burning from end to end within four minutes.
The Archbishop of York, Dr John Sentamu, addressed the memorial service outside City Hall, where flags flew at half mast.
He said it was important to remember those who had died.
Burns victims
"A community that forgets its memory becomes senile. So you the city of Bradford do well to remember the Bradford City fire disaster.
"This 25th anniversary commemoration is very important. As William Shakespeare says in All's Well That Ends Well, praising what is lost makes the remembrance dear," he said.
At the front of the crowd was former City player and manager Stuart McCall, who closed his eyes for much of the ceremony as he clutched a wreath.
Speaking after the event, Dr Sentamu said he remembered watching the events unfold on television.
Former City manager Stuart McCall held a floral tribute in the club's colours
He said: "Those flames are still before my face and eyes.
"I just hope, as this memorial has been wonderful, we never, never, never forget because when you forget you tend to think it doesn't matter really any more."
Bradford City Supporters Trust chairman Alan Carling said: "[The service] recalled the depth of emotion of the fire and the effect it's had on lives, especially the fans who suffered.
"But, also, how it drew the community together in response to it."
Mr Carling said: "There's no sense Bradford is over this. It's got a permanent place in the hearts and minds of Bradford."
A short service was also held at Bradford City's Valley Parade ground at 1500 BST.
On Tuesday evening, Bradford Cathedral hosted a service for anyone affected by the tragedy.
During the day of remembrance, a new stone street marker commemorating the tragedy was installed at the junction of Manningham Lane and Hamm Strasse.
The stone has a granite plaque bearing the date of the fire and the crests of the two cities and Bradford City football club.
Paul Firth, one of the Bradford City Fans who escaped the fire, said: "There will always be a part of me that stopped on 11 May 1985."
He told BBC News: "There's a stark contrast between what was happening at a quarter past three when we were all celebrating winning our first trophy for what seemed like hundreds of years, and what was going on by quarter to four, by which time we were trying to save our own lives."
Many of those injured in the fire suffered serious burns.
As a result, the University of Bradford set up its Plastic Surgery and Burns Research Unit.
On Tuesday, the university launched the UK's largest academic research centre in skin sciences, bringing together in one unit expertise spanning pharmacology, biology, chemistry, biochemistry, physics, and medicine.
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