The 80-year-old died peacefully at his home on New Year's Day.
Lord Bhatti represented the Rushey Mead ward on Leicester City Council for the Labour Party from 1983 until he stepped down before last year's election.
He rose to become deputy council leader and in 1995 the city's first Sikh Lord Mayor.
He was awarded the Order of Member of the British Empire (MBE) in the Queen's Birthday Honours list in June 2005, for his services to children in Leicester.
"I first met Culdipp Bhatti 30 years ago on the first day I arrived in Leicester. He was a man of integrity, honour and dedication to his family and to the people of Rushey Mead and his beloved city of Leicester," Vaz was quoted as saying by Leicester Mercury.
"He was a history maker breaking the glass ceiling when he was first elected. We shall miss him terribly and quite simply we will never see his like again," he said.
Bhatti was born in Punjab and came to England in 1959.
In the late 1970s he trained to be a teacher of Mathematics at Leicester University.
Bhatti's funeral will be held on Monday at Gilroes Cemetery in Leicester.
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