Many wept as they prayed for the pope outside the city's main cathedral.
The vigil was followed by a Sunday morning Mass, with the dead pope's body sat in the papal chair dressed in ceremonial robes.
He died at the age of 88 on Saturday, after reportedly suffering from cancer. He led the Church for four decades.
Coptic Christians make up 10% of Egypt's population of 80 million, making them the Middle East's largest Christian minority.
After attacks on Coptic Christians in recent years, Pope Shenouda had urged officials to do more to address the community's concerns.
A crowd of mourners estimated to be larger than 100,000, spent the night outside St Mark's Cathedral, many weeping as they prayed for the pope.
Thousands queued to see Pope Shenouda, whose body was placed in a coffin before being seated on a ceremonial throne wearing embroidered vestments and a golden mitre, and holding a gold-topped staff.
The government has given Coptic Christians three days off work to prepare for his funeral.
The BBC's Jon Leyne, in Cairo, says there is no timetable yet for the selection of his successor, who will be elected by a conclave of senior bishops.
Tributes have come in from around the world, with Roman Catholic Pope Benedict XVI offering prayers and US President Barack Obama praising Pope Shenouda as an "advocate for tolerance and religious dialogue".
Egypt's military rulers expressed the hope on their Facebook page that his wish of "preserving the unity of Egypt and the unity of its social fabric" would be achieved.
And a senior Muslim cleric, the Grand Imam of the prestigious al-Azhar university, Ahmed al-Tayeb, expressed sorrow and said he "greatly remembers his vision towards Jerusalem and its history".
Pope Shenouda had returned recently to Egypt after seeking treatment abroad.
Our correspondent says he sought to protect his Christian community's position within the Muslim majority by striking a conservative tone and lending tacit support to President Mubarak's rule.
Whoever succeeds him now faces the task of reassuring the Coptic community as the Islamists of the Muslim Brotherhood look on the verge of sharing power in Egypt for the first time, our correspondent says.
Tens of thousands of Egyptian Coptic Christians have held an overnight vigil in Cairo to mourn the death of their spiritual leader, Pope Shenouda III.