Lone and a bodyguard were shot dead on Tuesday while attending a rally in Srinagar, the summer capital of Indian-administered Kashmir.
The rose-strewn body of the Kashmiri moderate was carried through Srinagar on its way for burial on Wednesday.
Crowds shouted "we want freedom" and pro-Pakistan slogans as they slowly made their way along the eight kilometres (five miles) from the murdered leader's home to Martyr's cemetery in the city.
Lone's two sons and several senior separatist leaders were among relatives and friends who accompanied the body.
General strike
He will be raid to rest along with others who have died in more than a decade of armed insurgency in Indian-administered Kashmir.
Mr Lone was a senior figure in Kashmir's main separatist alliance - the All Party Hurriyat Conference.
No one has yet admitted carrying out the attack which killed Abdul Ghani Mr Lone.
But the his son, Sajjad Lone, blamed both Pakistan and the government of Indian-administered Kashmir for his father's death.
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