Englishman Robert Seddon led the 1888 squad to Australia, but drowned in the Hunter River, near Newcastle.
His grave at Campbells Cemetery is tended by officials from Maitland Rugby Club, and Lions manager Andy Irvine led a delegation that saw him joined by Lions skipper Sam Warburton, centre Manu Tuilagi, Lions chairman Gerald Davies and chief executive John Feehan.
Australian Rugby Union president David Crombie and Newcastle MP Tim Owen joined the Lions in saluting Seddon.
"When Bob Seddon died, he had no idea of the incredible legacy that he had left," Irvine said.
"125 years later, we are here as the 32nd team to have left Britain and Ireland, and we are incredibly proud to be able to represent the four countries.
"Rugby union is a sport that transcends all boundaries, whether it be race, creed politics or religion.
"It is a game that gives us great pleasure. I'd just like to say, on behalf of my touring team, it is a great honour to be here to commemorate our first captain."
The 1888 Lions played 35 matches in New Zealand and Australia. They won 27, drew six and lost two.