Prime Minister David Cameron greeted the 86-year-old Queen at the door of Number 10, posing for photos before going inside.
She met ministers, who presented her with a gift to mark her Diamond Jubilee after 60 years on the throne.
She sat in the Prime Minister's usual seat - with Cameron and Foreign Secretary William Hague sat either side.
It is believed to be the first time a monarch has attended peace-time cabinet since George III in 1781. George I ceased to chair cabinet in 1717.
The Queen's father, King George VI, attended war cabinet during the Second World War, the BBC reported.
Once inside, the Queen was introduced to each of the government's senior ministers in turn, as they bowed.
She shared jokes with Chancellor George Osborne, Defence Secretary Philip Hammond, and Deputy Prime Minister Nick Clegg.
After the Queen and the cabinet had taken their seats, Cameron formally welcomed her to the meeting and outlined the items of business on the agenda.
It began with Chief Whip Sir George Young talking about the change to royal accession rules, to allow a first born girl to become head of state even if she has a younger brother.
There were also updates on the forthcoming parliamentary business and Ken Clarke spoke about prospective justice measures, the BBC reported.
