The British Prime Minister David Cameron has praised the Queen's "healing" visit to Ireland.
Mr Cameron will fly in to Dublin this afternoon as part of the State trip.
He has told MPs in the British House of Commons, the relationship between Britain and Ireland has probably never been stronger.
Britain's Queen Elizabeth II has laid a wreath at the War Memorial Garden at Islandbridge to commemorate the 49,400 Irish soldiers who died fighting in World War One.
A military band played 'God Save the Queen' and the British monarch and President Mary McAleese laid commemorative poppy wreathes, one red, one green in honour of those who lost their lives.
Afterwards they observed a minutes silence before 'Amhrán na Bhfíann' was played.
Politicians from all sides, senior churchmen and judges sat with army veterans for the commemoration on day two of the historic state visit.
The Queen placed a wreath before President McAleese and both stepped back, bowed and observed a minute’s silence broken by a piper playing a Scottish air.
Among the guests were former Northern Ireland secretary Peter Mandelson, Northern Ireland First Minster Peter Robinson, Catholic Archbishop of Ireland Sean Brady and the head of the Church of Ireland Alan Harper. Others invited included UDA commander Jackie McDonald.
The ceremony builds on the symbolic reconciliation in 1998 when the Queen and the President unveiled a tower on the site of the battle of Messines Ridge in memory of the Irish dead of the First World War, and to inaugurate the Island of Ireland Peace Park.
It was the first public event undertaken by an Irish and British head of state.
Islandbridge gardens contain a War Stone inscribed “Their Name Liveth For Evermore”, and the 30ft Guillemont Ginchy Cross, the wall behind which bears the words in the Irish and English languages:
“I ndil-chuimhne are 49,400 Eireannach do thuir sa Chogadh Mhor 1914-1918 – To the memory of 49,400 Irish men who gave their lives in the Great War 1914-18”.
Again the Union flag flew along side the Tricolour and, to mark the role played by tens of thousands of Irishmen in the wars, three divisional flags of the British Legion.
The United Nations flag was also flown above the gardens.
The ceremony opened with a rendition of 'God Save The Queen' and the Tricolour at half-mast. After the sounding of the 'Last Post', the flag was returned to full height and Ireland's national anthem, 'Amhrán na bhFíann', was played.
Following the wreath-laying, the Queen and the Duke of Edinburgh were shown illuminated manuscripts, created by stained glass artist Harry Clarke, in the granite room of the memorial containing the names of all the soldiers commemorated.
The Queen shook hands with Mr Robinson, SDLP leader Margaret Ritchie and Ireland's Environment Minister Phil Hogan, while Tom Elliot, Ulster Unionist leader, Alliance leader David Ford and dignitaries from Messines and Ian Adamson, of the Somme Association, also attended.
The royal also met Finance Minister Michael Noonan.
Northern Ireland Deputy First Minister Martin McGuinness declined an invitation to attend the memorial service.
Mr Robinson said the service was a solemn event, a very relaxed but historic occasion, and another taboo had been swept out of the way.
The First Minister, whose wife Iris will accompany him to the State dinner tonight, said: “Everyone remembers the past but we have to look to the future, but there are clear indications as a society in the UK and Republic people are moving on.
“They want better relations and we are in a new era.”
Mr Robinson said it was disappointing Sinn Féin were not present.
“It would have been an excellent opportunity to show respect for traditions that have otherwise not been shown that respect in the past,” he said.
The UDA chief Mr McDonald, who shook the hand of President McAleese and her husband Dr Martin McAleese, said he was very proud to be at Islandbridge not only for his colleagues but also working class people who supported the peace process.
“Without the support of the working class community the peace process would not be working,” he said.