Arafat's coffin draped in the Palestinian flag was carried into a military mosque, where prayers were read by Egypt's top Muslim cleric in front of foreign dignitaries from some 80 countries and organizations.

"He has served his people all his life, until he faced Allah with courage and honesty. Let us pray for his soul," Grand Sheikh of Al-Azhar Mohammed Sayed Tantawi said.

After the brief prayers, a silver hearse drove the coffin to the starting point of a funeral procession.

Most of the world leaders then gathered in a makeshift tent also on the premises the al-Jalaa military club where Egyptian President Hosni Mubarak could be seen standing alongside with Arafat's nephew Nasser al-Kidwa to receive condolences.

At least 16 heads of state attended the service, mostly from the Arab nations, including Algeria, Lebanon, Syria, Saudi Arabia, Tunis, Yemen and Jordan.

Among the dignitaries were US Assistant Secretary of State William Burns, UN special envoy to the Middle East Terje Roed-Larsen and European Union Foreign Policy chief Javier Solana.

The procession started at 11:00 a.m. (0900 GMT), with the world leaders walking behind the hearse.

Mubarak was in the middle of the first line of the process.

The funeral was held under tight security, keeping away the public who bear deep love for the veteran Palestinian leader.

From the base, the coffin will be flown to el-Arish in Egypt's northeastern Sinai Peninsula, according to Palestinian coordinator Hani Jebour.

He said two Jordanian helicopters would then ferry the coffin and its accompanying delegation to the West Bank of Ramallah.

A burial will take place there at about 4 p.m. local time (1400 GMT).

Arafat, 75, passed away at 3:30 a.m. (0230 GMT) Thursday at a French military hospital outside Paris, where he had received medical treatment for a mysterious illness since Oct. 29.