A military cortege conveyed Mills’ body from the State House parliamentary complex, where it had lain in state since Wednesday, to Independence Square, where the funeral began Friday morning.
More than 10,000 people gathered in and around the square.
US Secretary of State Hillary Clinton, who has been on an African tour and arrived in Ghana on Thursday night, was also attending the funeral.
“He was like a brother to me. I will surely miss him,” Togolese President Faure Gnassingbe told journalists.
Benin President Thomas Boni Yayi, also the current African Union chairman, described Mills as “passionate about peace in Africa and in the region.”
His death on July 24 at age 68 following an illness came as a shock to many Ghanaians, despite rumours that he had been sick and reports that he suffered from throat cancer.
After the ceremony, the body will be taken to Osu Castle, the official presidential residence, for burial.
Early arrivals rapidly filled the large square, where heads of state and other dignitaries were placed in a special seating area, while large television screens broadcast the ceremony for those unable to get closer.
The event was also being shown on national television.
“Today is my saddest day,” said Akua Danso, an 80-year-old former teacher who was confined to a wheelchair, being pushed by her grandson.
“I have seen presidents come and go but he was the best. He was very humble. I wish I had the opportunity to meet him while he was alive, just to tell him that he was a gem,” she told AFP.
Mills’ vice president John Dramani Mahama was sworn in to serve out the remainder of his term hours after his death, as dictated by the constitution.
The new president is expected to be endorsed by the ruling party to run in the December election, which analysts say is likely to be close.
Ghana, a country of some 25 million people, has begun producing oil from its offshore Jubilee field, one of the largest discoveries in West Africa in recent years. The field’s operator Tullow has estimated that the field’s recoverable resources amount to up to one billion barrels.
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