She made the comments at a rally in the city in 2010 when she was fighting for the leadership of the party.
Ms Le Pen’s anti-immigration and anti-EU message is attracting increasing support in France.
Her party is hoping to win two French regions in December local elections.
Outside court, she insisted she had not committed any offence and questioned the timing of the trial.
“We’re a month away from a regional election and this affair dates back five years,” she told reporters.
An opinion poll at the weekend suggested her niece, Marion Marechal-Le Pen, could wrest control of the key southern region of Provence-Alpes-Cote d’Azur (Paca) from the governing Socialists.
Key moment for Le Pen, by Lucy Williamson, BBC Paris correspondent
This trial goes right to the heart of the National Front’s revamped political campaign.
Under Marine Le Pen, the party has tried to “detoxify” its public image and distance itself from accusations of racism and anti-Semitism, but critics say its focus has simply switched to Muslims.
Not so, says the party leadership: their target is not Muslims per se, but Muslim extremists; those whose belief and behaviour threatens the “uni-cultural” France that Ms Le Pen envisages.
The FN has been treading a careful line between broadening its appeal to a wider section of voters, and voicing what it says are the legitimate concerns of France’s “forgotten” working classes, eking out a precarious existence in the face of France’s immigration policies and globalised economy.
The Lyon trial could deliver a vicious kick to Ms Le Pen’s work on cleaning-up her party’s image (and also to her own chances in December’s regional elections); or it could provide another chance for the party to present itself as victimised by the French political system; pitted against remote, out-of-touch elites.
Alarm at the rise of the National Front (FN) prompted President Francois Hollande to warn France not to take the risk of backing the far right.
“Don’t play with this way of voting just to send a message, just because of unhappiness and anger,” he told French radio. “For investors, for external trade, jobs and growth, there will be consequences.”
Marine Le Pen took over the FN leadership in 2011 and has since tried to steer the party away from its racist and anti-Semitic past.
It was during a campaign speech in December 2010 that she told FN supporters: “I’m sorry, but some people are very fond of talking about the Second World War and about the occupation, so let’s talk about occupation, because that is what is happening here.”
“There are no tanks, no soldiers, but it is still an occupation, and it weighs on people.”
The phenomenon of street prayers emerged when French Muslims were unable to find space in mosques, and after a political outcry the practice was banned in Paris in 2011.
Ms Le Pen was investigated for her public remarks and she was eventually stripped of her immunity from prosecution by the European Parliament in 2013.
Ahead of the trial, Ms Le Pen made clear that she would use the occasion to defend her right to freedom of expression.
She is accused of incitement to discrimination, violence or hatred towards a group of people because of their religious affiliation and if found guilty could face up to a year in jail and a fine of €45,000 (£33,000; $51,000).
The French Council of the Muslim Faith said her remarks had fed a climate of Islamophobia.