Mourners threw flowers and wept as the flag-draped coffin was carried to Rugova's final resting place in the white marble "Tomb of Martyrs" complex in Pristina.
Rugova died of lung cancer on 21 January.
The funeral is to be attended by a number of top international officials, led by EU foreign policy chief Javier Solana, the UN mission in Kosovo chief Soren Jessen-Petersen, and UN special envoy Martti Ahtisaari.
Kosovo is a Serb province administered by the United Nations.
Spotlight On Kosovo
THE WORLD'S NEWEST NATION? The region of Kosovo has a population of more than 2 million, some 90 percent of whom are ethnic Albanians. It was one of the poorest regions in the former Yugoslavia, but has considerable mineral wealth and an enterprising population, many of whom work abroad but keep close contact with Kosovo. All ethnic Albanian political parties seek independence on the principles of self-determination and majority rule. They feel that Serbia lost its historically based claim to what was its autonomous province under the 1974 constitution by revoking that autonomy in the late 1980s and then conducting a crackdown in 1999 that forced some 850,000 people to flee their homes.
Since NATO's intervention that year to stop the expulsions, Kosovo has been under a UN administration (UNMIK). The UN has begun to gradually transfer functions to elected Kosovar institutions. The primary Serbian concerns are physical safety for the local Serbian minority, a secure return for the tens of thousands of Serbian displaced persons, and protection for historic Serbian religious buildings. The main problems affecting all Kosovars, however, are economic. Until Kosovo's final status is clarified and new legislation passed and enforced, it will not be able to attract the investment it needs to provide jobs for its population, which is one of the youngest and fastest growing in Europe. Prosperity is widely seen as the key to political stability and interethnic coexistence in Kosovo, as is the case in much of Southeastern Europe.
For an archive of RFE/RL's coverage of developments in the disputed region of KOSOVO, click here.