Two thousand people, including many friends and relatives of the 67 British victims, gathered at the cathedral for the sombre service of remembrance.
Prime Minister Tony Blair, Prince Charles and Prince Harry were among the congregation, while hundreds of people gathered outside to pay tribute.
The Bishop of London Richard Chartres told the congregation the cathedral held an "ocean of suffering", but mourners must "love - and go on".
He said hope rested in the solidarity shown by those affected, which he said "can turn compassion into energy capable of overcoming indifference and downright evil".
Later in the evening, hundreds of people including US Ambassador William Farish attended an open service at Methodist Central Hall in Westminster.
Candles were lit at the American Church in London, and the names of all those who died were displayed.
At 1346 BST - the time when the first jet hit the World Trade Center one year ago - a minute's silence was held in St Paul's and across Britain.
More than 3,000 white rose petals - one for every victim of the four hijacks - were released from the cathedral's great dome as a single cellist played.
The London Stock Exchange and most of the City also observed the silence in a tribute to their American counterparts.
One trader at a major bank said the entire day had been subdued and sombre throughout the City: "Everybody knows someone, or knew of someone out there."
Staff and passengers at Heathrow airport fell silent, as did delegates at the TUC conference, and staff at the US air force bases in Suffolk.
Many shops and offices stopped work and the emergency services paid their respects, with fire brigades parking their engines in front of stations.
The altar at St Paul's was graced with a tattered Union flag which had earlier been handed to the UK by Lieutenant Frank Dwyer of the New York Police Department.
The flag had been found in the rubble of the World Trade Center, and was presented to Home Secretary David Blunkett during an earlier service at the US Embassy in Grosvenor Square in London.
At the ceremony Mr Farish referred to Britain as "America's truest friends" who had stood "firmly by our side" in the aftermath of the attacks.
Lieutenant Dwyer described the flag as a "symbol of endurance and the strength of the British people".
Other services were held around the country, including a Muslim ceremony at the London Central Mosque.
A six foot stone memorial was unveiled in Hayle, Cornwall to Briton Rick Rescorla, 62, who helped rescue others in the World Trade Center but died himself.
Security was tightened at several key sites, with some armed roadblocks in London and a no-fly zone in force at key times across the capital.
Click here to watch people in London give their views about 11 September