President Bashar al-Assad's regime was able to display its control over the world heritage site six weeks after the army, with Russian help, recaptured it from Islamic State fighters.
The event marked the centenary of Martyrs' Day, when Syrian nationalists were executed in Damascus by the Ottoman occupiers in 1916.
"We are here to celebrate those who died to save our homeland. We salute the martyrs of Syria and among them the heroes who died in this very theatre," the event's presenter said before the police and army orchestra took the stage in the ancient arena.
Last July Islamic State released a video showing the mass execution of 25 Syrian soldiers in the theatre. Bullet holes remain visible on one wall.
In a symbol of Moscow's role in the recapture of Palmyra, 20 Russian soldiers marched onto the stage waving Russian and Syrian flags.
- Propaganda coup -
The previous day, leading Russian musicians staged a classical concert in the ancient theatre in a show by the Kremlin to herald its successes in the war-torn country.
Famed conductor Valery Gergiev led Saint Petersburg's celebrated Mariinsky orchestra through pieces by Johann Sebastian Bach, Sergei Prokofiev and Rodion Shchedrin in front of a crowd of Russian soldiers, government ministers and journalists.
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Syrian troops backed by Russian air strikes and special forces on the ground recaptured the UNESCO world heritage site from IS fighters in March, delivering a major propaganda coup for both Damascus and Moscow.
The UN cultural agency said last month that the ancient city had suffered significant damage at the hands of Islamic State fighters, but that the archaeological site retains much of its authenticity.
According to the experts, parts of the grand colonnade -- an ancient avenue -- and agora courtyard remain intact.
But they observed "the destruction of the triumphal arch and Temple of Baal Shamin, which was smashed to smithereens".
Russian army sappers said last month they had demined the site -- known as the "Pearl of the Desert".
For Friday's event Syrian authorities bussed in delegations from throughout the country.
Between each piece of music the crowd chanted "Syria" and "the sons of the martyrs protect the leader of the nation," in reference to Assad.
However the civil war is not far away. Just 30 kilometres (20 miles) from the site Islamic State fighters are still at large.
Palmyra, northeast of Damascus, contains the monumental ruins of a great city that was once a crucial hub for trade and culture.
Until the Syrian conflict broke out in March 2011, the site was a key tourist destination.