Teji, who passed away around 1.15 p.m. Friday, was admitted to the Lilavati Hospital in suburban Bandra in January for multiple age-related health problems.
The funeral procession started from the Bachchans' bungalow Pratiksha. The pallbearers included Amitabh, brother Ajitabh, Abhishek, son-in-law Nikhil Nanda and other family members.
Others in the procession included Reliance's Anil Ambani, Samajwadi Party (SP) leader Amar Singh and Sahara Group head Subroto Roy.
Amitabh Bachchan lit the funeral pyre around 10 a.m.
A steady stream of callers-on included Yash Chopra, Prasoon Joshi and Mac Mohan who paid homage to Teji at the crematorium. They also offered condolences to the bereaved family members, including Jaya, daughter Shweta and daughter-in-law Aishwarya.
Tight security was maintained at the venue and on the route to the crematorium, mainly to keep away hordes of fans who had lined up since early morning to catch a glimpse of the stars.
The Bachchan family had earlier planned the last rites at Chandanwadi crematorium, about 20 km in south Mumbai from the Bachchans' old bungalow `Pratiksha', but later decided on the nearby Juhu crematorium.