Draped in the red, white and blue British flag, Thatcher's casket was driven through London's Whitehall government district in a black hearse as tourists and parliament workers looked on in bright sunshine.
Four undertakers then carried it on their shoulders before placing it inside the crypt of the Chapel of St Mary Undercroft, a cavernous vaulted place of worship first completed by King Edward 1 of England in 1297.
Aged 87, Thatcher, who ruled Britain from 1979 to 1990, died after suffering a stroke on April 8.
Security was tight, with armed police on hand as lawmakers attended a private memorial service commemorating her career as Britain's longest-serving prime minister of the 20th century.
Her children, Mark and Carol, also attended.
The proceedings were low key, unlike her planned ceremonial funeral on Wednesday which some left-wing lawmakers have called an expensive political advert for her ruling Conservative party, which is trailing the opposition Labour party by 10 percent in the polls.
The guest list has prompted talk of diplomatic snubbing.
A spokesman for Prime Minister David Cameron denied the United States had snubbed Britain by not sending anyone senior from the administration of President Barack Obama.
"Absolutely not," the spokesman said.
Obama is sending George Shultz, a secretary of state for Republican President Ronald Reagan, and James Baker, who had a number of senior roles in both the Reagan and George H.W. Bush presidencies. No senior serving politicians are attending.
COST CONCERNS
The spokesman also said the Argentine ambassador had refused an invitation to attend, a decision coloured by worsening diplomatic tensions over the contested Falkland Islands.
Relations between the two countries remain strained after a 1982 war over the islands during which Thatcher ordered a task force to retake the contested South Atlantic archipelago after Argentine troops seized it by force.
But in Britain it is the estimated 10-million-pound ($15 million) bill for the funeral and its grandiose nature which has drawn criticism from some lawmakers.
Thatcher was admired by many but despised by other Britons and her death has - at least temporarily - resurrected the tribal left-right politics of the 1980s with her most extreme opponents "celebrating" her death and her most ardent supporters hailing her as the country's greatest peacetime prime minister.
Some are angry that she is being given such a lavish funeral at public expense, with Queen Elizabeth attending along with more than 700 armed forces personnel, some of whose units played a pivotal role in the Falklands conflict.
"This is a state funeral in all but name without the consent of parliament for funding and without the consent of the people. Churchill, who was the only PM over the past 100 years to have a state funeral, unified the country, while Margaret Thatcher divided it," Labour lawmaker John Healey told the Guardian newspaper.
In a ceremony that will be covered live by Britain's biggest broadcasters, her coffin will be carried on a horse-drawn gun carriage through central London to St Paul's Cathedral where more than 2,000 guests will hear her favourite hymns and bid her farewell.
