The pardon is now seen by many as essential to ending America's greatest political crisis that had divided the country.
Cabinet secretaries, supreme court justices and military leaders joined Ford's widow, Betty, 88, inside Washington's National Cathedral to honour the memory of her husband.
Ford, the 38th American president, died a week ago. At the time of the pardon, Ford was assailed for it and lost the 1976 election to Democrat Jimmy Carter.
Carter, now 82, attended the memorial service along with the remaining former presidents, Bill Clinton, 60, and Bush's father, George HW Bush, 82.
"President Ford's time in office was brief, but history will long remember the courage and common sense that helped restore trust in the workings of our democracy," Bush said, with Ford's flag-draped coffin lying before him.
|File photo of Ford, the 38th US president, who|
died a week ago [EPA]
He said Ford took office "because America needed him, not because he wanted the office", at a time of economic inflation and political turmoil and the end of the Vietnam war".
The president added: "Amid all the turmoil, Gerald Ford was a rock of stability."
For his part, Bush Sr said: "Gerry Ford's decency was the ideal remedy for the deception of Watergate," the scandal that drove Nixon to resign the presidency.
With the Iraq war looming as a source of Washington combat this year, a political truce was in effect for a national day of mourning for Ford, who will be buried in Grand Rapids, Michigan.
In the audience were many critics of Bush's Iraq policy. Seated near Bush in the front pew was Carter, a frequent critic.
Honorary pallbearers included Brent Scowcroft, who was Bush Sr's national security adviser and cautioned him against sending US troops into Baghdad in the first Gulf war in 1991.
Nearby was James Baker, former secretary of state, whose Iraq Study Group report offering Bush recommendations for changing course in Iraq seems to have largely been ignored by Bush as he considers a change in policy to be announced soon.
Elsewhere were Colin Powell, former secretary of state, who has been critical of Iraq, as well as Al Gore, the former vice-president.