Civilians queued in orderly lines past a tall, gilded statue of Niyazov that rotates to face the sun - the city's main landmark.
Armoured personnel vehicles and a black Mercedes carrying a huge portrait of Niyazov escorted the coffin to Kipchak, a town west of Ashgabat where Niyazov was born, as rows of soldiers stood to attention and saluted.
A former communist apparatchik, Niyazov ruled his nation with an iron fist for 21 years though a self-obsessed personality cult.
He declared himself president-for-life and was referred to at home as Turkmenbashi, or father of the Turkmen.
He was buried in a family mausoleum near the biggest mosque in former Soviet Central Asia.
Some people in Ashgabat said they feared for the future after the death of Niyazov, who crushed dissents, jailed critics and controlled every aspect of people's lives.
"I am really scared," said Olga, an ethnic Russian in her 50s, who would not give her last name. "The future of Turkmenistan is unclear after President Niyazov's death."
Some in the crowd were less pessimistic or just repeated the official line.
Suleiman, a trader in his 30s, said: "It was fate that he died. But his politics will live on."
The crowds of clearly grieving ordinary citizens recalled the mass mourning after the 1953 death of Josef Stalin.
Niyazov governed his nation like a personal fiefdom, mixing old communist ways and eccentricities.
He left no heir apparent, creating fertile ground for political infighting.