Mr Erdogan said: "People that night did not have guns, they had a flag and more importantly, they had their faith."
He backed the death penalty for coup plotters and said they should wear Guantanamo Bay-style uniforms.
Some 250 people died and 2,196 were wounded fighting the coup attempt by an army faction on 15 July last year.
The government has since dismissed more than 150,000 state employees, saying it is rooting out coup supporters.
Critics say the dismissals, and a wave of 50,000 arrests, are part of an attempt to purge dissent.
- The human impact of Turkey's purges
- The officers who cannot go home
Mr Erdogan was addressing tens of thousands of Turks who had rallied to the bridge over the Bosphorus where civilians had confronted pro-coup soldiers last year.
He said: "I am grateful to all members of my nation who defended their country."
Mr Erdogan said that 250 people had lost their lives but the country had won its future.
"Putschists who closed off the bridge on that night wanted to show the world that they were in control," he said, but were countered by "millions who took to the streets that night to defend the honour of their nation".
He said he would "break the heads of the traitors" who plotted the coup.
Mr Erdogan also said he had spoken to Prime Minister Binali Yildirim about the coup plotters, saying: "When they appear in court, let's make them appear in uniform suits like in Guantanamo."
The president then unveiled a "martyrs' memorial" at the bridge, which has been renamed the Bridge of the Martyrs of July 15.
He is now returning to Ankara to address parliament after midnight (21:00 GMT), at the exact time last year it was attacked by coup plotters.
The president will end proceedings by unveiling a monument to the coup's victims at his palace in the capital at dawn.
The date of 15 July has been declared an annual holiday.
Earlier Mr Yildirim told a special session of parliament that 15 July 2016 was a "second War of Independence", following the conflict that led to the creation of the modern state in the 1920s.
"It has been exactly one year since Turkey's darkest and longest night was transformed into a bright day, since an enemy occupation turned into the people's legend," Mr Yildirim said.
However, Kemal Kilicdaroglu, the head of the main opposition Republican People's Party, condemned the government's actions since the coup.
He said: "This parliament, which withstood bombs, has been rendered obsolete and its authority removed. In the past year, justice has been destroyed. Instead of rapid normalisation, a permanent state of emergency has been implemented."
Turkey's trauma after night of the tanks
On 15 July last year, the coup plotters, armed with tanks, warplanes and helicopters, declared that they had taken over on state media, and bombed parliament and other key locations.
They tried to detain Mr Erdogan as he holidayed in an Aegean resort, but he had left and the coup was thwarted by civilians and soldiers loyal to the president.
The Turkish authorities accused a movement loyal to the Muslim cleric, Fethullah Gulen, of organising the plot.
Mr Gulen, who remains in the United States, denies any involvement.
Washington has so far resisted calls from the Turkish authorities to extradite him.
The BBC's Turkey correspondent, Mark Lowen, says that, a year on, the unity against the coup has faded, and divisions over the rule of law have widened. For half of the country, he says, 15 July was its rebirth; for the other half, its aftermath is killing off what was left of Turkish democracy.
Critics say Mr Erdogan is using the purges to stifle political dissent, and last week hundreds of thousands of people gathered in Istanbul at the end of a 450km (280-mile) "justice" march against the government.
The president accused the marchers of supporting terrorism.
On Friday, the government continued its dismissal of state employees, sacking another 7,395 for alleged links to what it calls terrorist groups.
[BBC SOURCES]
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