Sir Alex Ferguson Stars John Barnes and Luther Blissett joined fansat the service St Mary’s Church, Watford.
BBC commentator John Motson will read a tribute from ex-Watford owner Sir Elton John who will not be at the funeral.
Thousands of fans have lined the streets to pay respects to Taylor, who died on january 12 aged 72.
Rev Tony Rindl, leading the service, said: “Graham’s death has come as a great shock to us.”
Taylor, who was born at Castle Farm in September 1944, the son of Bernard and Dorothy, guided England to the European Championships in 1992.
However a 2-1 defeat at the hands of hosts Sweden sparked fierce criticism.
England and Taylor parted company after the team failed to qualify for the World Cup finals in 1994.
Taylor took out membership in the Team500 club to help save the Tigers as he played his part in backing world’s fourth oldest club.
Speaking at the time, Taylor said: “I lived for three years in Worksop after I was born, and was then brought up in Scunthorpe.
“But we used to visit my grandparents and holiday in Worksop.”
“I remember my Grandad taking me to see Tigers when I was five or six and I stood behind the goal.”
“Someone scored for Worksop and I can still see the ball bulge the net and that has stayed with me all of my life.”
His family moved to Scunthorpe when he was three, but the former Aston Villa boss regularly returned to Worksop to see his grandparents on holiday.
He also watched Worksop Town with his grandaparents.
His dad was a sports reporter for the Scunthorpe Evening Telgraph and used to take him to games there.
After representing England at schoolboy level, Taylor played professionally with Grimsby and Lincoln before an injury cut short his career in 1972.
He became the youngest FA coach at just 21.
After managing Lincoln he moved to Watford, guiding them to the FA Cup Final in 1984, losing 2-0 to Everton.
He returned to Watford after his spell as England manager, taking them to the Premiership.