The town's men and boys fled into the surrounding hills, but were hunted down by the troops, who shot and buried them in mass graves.
They were then dug up and reburied in more than 70 different sites, in an effort to cover up the extent of the killings.
Act of genocide
The massacre has been designated an act of genocide by the UN's war crimes court and the international court of justice. It is remembered as the darkest day in the bloody break-up of the Yugoslav federation in the 1990s.
Sunday's memorial was an emotional occasion for Srebrenica, which has struggled to recover from losing two generations of men and boys in the incident.
Hatidza Mehmedovic, 68, attended the ceremony to bury her husband and two sons.
"I waited for them to return alive, I could not believe such a crime could have been committed. Today, my hope dies," she said.
"It was not only my sons, thousands of people were killed. The intent was to make sure that no Muslim would live in this place. I don't wish on any other mother to have to live through this."
Nearly 6,500 victims have been identified, but relatives of those still missing are hopeful that more bodies will be found in the dense woodland surrounding the town.
Boris Tadic, Serbia's president and the first dignitary to arrive at the ceremony, said he came in an "act of reconciliation".
Tadic said he hoped "to build bridges of friendship and understanding among nations in the region" by attending the ceremony.
Some of the ceremony's attendees heckled the president.
Dzemaludin Latic, a Muslim political leader who attended the ceremony, told Al Jazeera that "in Bosnia, we have [Serbian] political leaders ... who do not want to apologise for this genocide".
"[But] Mr Tadic sincerely wants reconciliation", Latic said.
Serbia has for years denied the scale of the crime and many Serbs, led by nationalist politicians, believe that allegations of genocide have been exaggerated as part of an international political conspiracy against the country.
But in March, the country's parliament passed a declaration condemning the massacre and apologised to the victims and their families.
Al Jazeera's Barnaby Phillips reports on a Greek journalist who is being sued after claiming that Greeks were involved in the Srebrenica massacre
General Ratko Mladic, the alleged mastermind of the killings, is still on the run and believed to be hiding in Serbia, where many see him as a heroic figure.
The other alleged architect of the massacre, Radovan Karadzic, was arrested in Belgrade in 2008, and is currently fighting charges of genocide, war crimes and crimes against humanity at the International Criminal Tribunal for the former Yugoslavia (ICTY).
The political party that he founded, the Serbian Democratic Party, chose to honour him on Saturday with a medal, saying it was not ashamed of the past.
UN peacekeepers were heavily criticised for allowing the massacre.
The Dutch troops tasked with protecting the town did not have the equipment or mandate to do so and allowed Bosnian Serb soldiers to take Muslim men and boys away after being assured they would not be harmed.