Men wept and women wailed as the coffin of Adel Yousef was carried into the Syrian Orthodox Church of St. Peter and St. Paul in Baghdad's central Karrada neighbourhood, near where the priest was killed in a drive-by shooting on Saturday.
Mourners hurled flowers at the open coffin as it was carried through the modern church building.
Iraq's small Christian minority has tried to keep out of the sectarian violence that has killed tens of thousands of Iraqis since the 2003 U.S.-led invasion. But Christian clergy and churches have been targeted repeatedly in the past few months.
The Archbishop of Mosul of Iraq's largest Christian denomination, the Chaldean Catholics, was kidnapped in the northern city in February and found dead two weeks later.
"They are blind, mercenary people, who attack Christians because we are so few in Iraq and we cannot respond on a large scale," said an elderly man who works at the church as an engineer.
"But this is our country and our life. We will endure it," he said. Like other mourners, he asked that his name not be published for security reasons.
Religious leaders from other denominations came to pay their respects, including Chaldean Catholic Archbishop Emmanuel III Delly, who earlier told Reuters: "How many people have been killed? Christians, Muslims, Sabaeans, people who have dedicated themselves to serving this country, but they are killed."
"We are ready to forgive the people who committed these crimes for the sake of the single family of Iraq."
In Rome, Pope Benedict lamented the killing.
"(The Pope) prays that all people will follow the ways of peace in order to build a just and tolerant society in the beloved land of Iraq," the Vatican said in a telegram, signed by Secretary of State Tarcisio Bertone.
Many of Iraq's Christians have left the country, among the two million refugees who have fled to neighbouring states. But the mourners at Sunday's funeral said they refused to be intimidated into leaving their homeland.
"Sometimes I think of leaving Iraq. But I insist on staying in Baghdad. It is an issue of faith," said a young man.
