The mausoleum is made of glass and beige Jerusalem stone and surrounded on three sides by water. A piece of train track was also entombed under Arafat's grave.
The water and track are meant to symbolise the temporary nature of the mausoleum, as Palestinians hope to one day bury Arafat in Jerusalem.
In the ceremony Abbas called for Arafat to be buried in Jerusalem, "which he loved, and where he was born, and which our entire people is determined will be the capital of a Palestinian state".
Israel has long refused requests for Arafat to be buried in Jerusalem, citing security concerns.
The Arafat Foundation, set up to preserve the Nobel peace laureate's legacy, has supervised the building of the memorial, which will also include a mosque and a museum.
It is chaired by Nasser al-Qidwa, Arafat's nephew and the former Palestinian representative to the United Nations.
The Arafat museum will exhibit his personal effects, items from his office, presents and documents, al-Qidwa said.
Suffering from stomach pains, Arafat was airlifted to a hospital in Paris, where his wife and daughter lived, before falling into a coma and dying on November 11, 2004.
The precise cause of Arafat's death is still mysterious.
Several Palestinian officials accused Israel of poisoning him although these claims have never been verified.