Mayor Michael Bloomberg joined other officials Sunday morning for a wreath-laying ceremony before the parade started.
U.S. Deputy Secretary of Defense Ashton Carter said, "We remain forever indebted. We honor you today and every day."
Both veterans and active duty military members were also praised for their work helping recovery efforts in the region after Superstorm Sandy hit nearly two weeks ago.
Former Mayor Ed Koch was the grand marshal for the parade, which ran for 30 blocks, starting at 26th Street.
Also marching were the Navajo Code Talkers, who transmitted coded messages during WWII, and other veteran groups.
Some participants in the parade were collecting coat donations for Superstorm Sandy victims.
The theme is "United we Stand" and the parade marks the 200th anniversary of The War of 1812.
In Washington, President Obama has paid tribute at a Veterans Day ceremony at Arlington Memorial Cemetery to "the heroes over the generations who have served this country of ours with distinction."
He says the wreath he laid at Tomb of the Unknowns at Arlington National Cemetery is intended to "remember every service member who has ever worn our nation's uniform."
Obama said in a speech at the cemetery's Memorial Amphitheater that America will never forget the sacrifice made by its veterans and their families.
He also says that "no ceremony or parade, no hug or handshake is enough to truly honor that service." Obama says the country must commit every day "to serving you as well as you've served us."
Get Eyewitness News Delivered