Part of a flypast of World War II aircraft, the poppies were released by a Lancaster Bomber over The Mall - outside the palace - as the Queen and Royal Family looked on.
The day falls on a symbolic rather than a historically significant date, with the focus on remembrance and thanksgiving.
The Queen earlier addressed the crowd, speaking of the "present difficult days for London" after Thursday's bombings.
She said the people of the war generation had set an example.
In her address, she told those gathered in Horse Guard's Parade that the years of war had not been in vain - but sadly, it could not be claimed the world had been free from conflict or terror since 1945.
"It does not surprise me that during the present difficult days for London, people turn to the example set by that generation, of resilience, humour, sustained courage, often under conditions of great deprivation," she said.
"That example, and those memories, should be kept alive by younger generations as they in turn strive to keep the peace in our troubled world."
Londoners of today, more than ever, can emhasise with a generation that fought one of the world's greatest evils.
Jews, Slavs, gypsies, the mentally ill, homosexuals, were singled out as unworthy of life - and were murdered.
Dr Williams described it as a "fitting response" to the bombings on Thursday, in which at least 50 people have been confirmed as dead so far.
He said: "Today of all days, we need no reminder that the spirit of murder and humiliation is still abroad, as your majesty reminded us on Friday, there is a generation of people for whom the sight of a devastated, bombed London will bring back harsh memories; memories not only of physical damage but of the sense of obligation to go on resisting the venomous tyranny responsible for it."