The devastating fire at Blackburn's Pleasington Crematorium in June was caused by a smoking cigarette butt thrown over the fence into the bin storage area.
It then ignited dead dry flowers before spreading to the main building, a meeting of Blackburn with Darwen Council has been told.
The cause was revealed on Monday night by environment boss Councillor Jim Smith.
The family, whose funeral had to be halted midway through due to the fire and evacuated from the building, said the smoker who threw the cigarette was "inconsiderate and careless" and the incident was devastating for the already grieving family.
Afterwards, he said the cigarette butt appeared to have come from outside the crematorium boundaries.
Cllr Smith said he expected the 80-year-old Tower Road building to be back in operation later this month or early next.
The family of Blackburn-born Brian Whittaker, whose funeral was taking place at Pleasington Cemetery and Crematorium, had to evacuated on Thursday, June 15, as flames broke out near them.
Since then the building has remained close for repairs, which are fully covered by insurance, after the cremation room was severely damaged.
Cllr Smith was questioned over the fire by his Conservative counterpart Cllr Julie Slater, who said: "The recent fire at Pleasington Crematorium has caused a lot of distress to bereaved families.
"Have these families received any apologies from the council and are they being offered any compensation towards them having to wait for funerals, which are having to be held off and then travel all the way to Accrington for the funeral?
"I do think we need to look at letters of apology to those families affected.
"Is it true there was a waste paper bin that was set on fire near where the cremations are taking place?"
Cllr Smith said: "It was a terrible thing and two families were affected on the day.
"Both of those families were compensated by us. It's still hard work for other families.
"We're looking at the end of July, beginning of August to restart the crematorium again.
"We believe it was started by a cigarette."
Livesey with Pleasington ward Tory Cllr Paul Marrow said: "People have asked questions: when its reopening; how much it cost; were we insured?
"There's a plethora of questions about it."
Cllr Smith replied: "We are insured and covered for everything so there is no financial cost to the council.
"The only cost is to the poor families that have been affected and we feel sorry for them.
"It's very technical equipment so it has to be just right."
After the meeting Cllr Smith added: "We believe it was started by a discarded, still lit cigarette end thrown or dropped over the fence.
"It went into the bin storage area where there were a lot of dead and dried flowers.
"It set light to them and then spread to the main building."
Mr Whittaker's daughter Louise Greenhalgh said: “It was a devastating day for us and caused by a careless act by inconsiderate people.
“It’s not really an innocent thing. They have thrown a lit cigarette butt on the floor.
“People need to think about their actions in the future.
"The council should think about making it a ‘no smoking area’ at the cemetery.”
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