Leaders sat on a stage at the ceremony beneath a big picture of Arafat, as the audience chanted his name and sung Fatah songs.
Another large portrait showed Arafat alongside the current Palestinian leader Mahmoud Abbas.
“We are going to continue in the struggle until we achieve the Palestinian state,” said Abdullah Franji, the top Fatah official in Gaza.
“We will remain loyal to the path of Yasser Arafat and Yasser Arafat’s struggle and to Yasser Arafat’s legacy to national unity.”
Arafat, 75, died a year ago in a Paris hospital, and there are still questions surrounding his dramatic demise, with many senior officials holding the firm belief he was poisoned.
He had been airlifted to France on October 29 before lapsing into a coma from which he never emerged.
A year-long investigation by a Palestinian ministerial committee into the cause of death has drawn a blank.
The medical report listed the immediate cause of death as a massive brain haemorrhage resulting from an infection, however does not detail the cause of the infection.
Arafat guided Palestinian aspirations for four decades and jointly won the 1994 Nobel peace prize along with then-Israeli Prime Minister Yitzhak Rabin.
His grave in the courtyard of the Muqataa, the Palestinian Authority headquarters in Ramallah, will provide the focus for official commemorations on Friday, and the foundation stone for a new Arafat museum and mosque complex will be laid.
A larger ceremony will be held on Saturday.
“Abu Ammar (as Arafat was widely known) remains the symbol of the Palestinian cause and our struggle for freedom,” declared Nabil Abu Rudeina, one of Arafat’s closest advisors and today Abbas’s official spokesman, ahead of the first anniversary.
“We cannot talk about the history of the Palestinian people without talking about Arafat. He managed to transform the Palestinian problem from a refugee problem into a national struggle of a people aspiring to independence.”
Palestinian-US relations may have warmed up significantly, with the moderate violence-denouncing Mr Abbas visiting Washington twice since May, but optimism generated by Israel’s historic pullout from the Gaza Strip has not made solid gains.