Prime Minister Prayut Chan-O-Cha, a former army chief who seized power in 2014, led the ceremony, which saw a crane erect the first of a series of giant steel pillars that will form the cornerstones of what will be a largely wooden pyre next to Bangkok's sprawling Grand Palace.
The ceremony was infused with the religious ritual that permeates palace life with Buddhist monks chanting mantras and Hindu Brahmin priests blowing conches as workers in hard hats fixed the pillar to a concrete plinth.
Few Thais have ever seen a monarch's funeral.
The widely admired Bhumibol was the world's longest serving monarch until his October death.
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He ruled for seven decades and his passing has plunged Thailand into an unknown future with his unpredictable and less known son Maha Vajiralongkorn on the throne.
Designs for the funeral pyre show palace architects intend to build a pyre more than 50 metres (165 feet) high, complete with nine spires and covered in sculptures of mythical beasts.
Bhumibol's body will be placed at the centre before it is set alight with the belief his spirit will return to the mountain.
"The cremation site will be constructed like a divine palace on Mount Meru," General Thanasak Patimaprakorn said during the ceremony.
Thanasak, a key coup plotter in 2014 and a deputy prime minister, has been tasked with overseeing the pyre's construction.
No date has been given for the funeral, but multiple government officials have told AFP they expect the cremation to take place at the end of the one-year official mourning period, in October or November.