"As brutal and unfair and horrible as Jacques' death was, we have to look deep into our hearts to find the light," said Rouen Archbishop Dominique Lebrun.
Some 2,000 mourners packed the soaring Gothic sanctuary, with hundreds more watching the ceremony, which began minutes after a heavy rainstorm, on a giant screen outside.
A section of pews in the 11th-century cathedral was filled by residents of Saint-Etienne-du-Rouvray, the nearby industrial town where the two jihadists, both 19, slit Hamel's throat as he celebrated mass in an attack that shocked the country as well as the Catholic Church.
A red stole, symbolising Christ's martyrdom, was draped over a giant cross beside the altar, with the Rouen diocese explaining that "Father Hamel's death was similar to that of Christ, unjustly convicted and put to death."
Another red stole was set atop a white priest's vestment lying over Hamel's coffin.
In a show of inter-faith solidarity, Muslims and Jews were among the mourners.
"It was a duty," Hassan Houays, a Muslim maths teacher from Saint-Etienne, told AFP. "We are here so that we can get along together."
Reconciliation was an overarching theme of the mass, which recalled Jesus urging his followers to "love your enemies and pray for those who persecute you."
Hamel's sister Roselyne told the congregation: "Let us learn to live together. The world has so much need for hope."
Father Hamel. Photo: AFP
Archbishop Lebrun said the Christian, Muslim and Jewish communities have "decided to come together to say 'never again'."
Along with churches across France, the Rouen cathedral had on Sunday opened its doors to Muslims wishing to show their solidarity after the grisly attack, with the visitors paying a moving tribute to Hamel while denouncing radical Islam.
French Interior Minister Bernard Cazeneuve, whose portfolio also includes inter-faith relations, led the political delegation to the mass.
As on Sunday, security was tight for Hamel's funeral, with around 20 riot police vans stationed around the cathedral and police closely checking mourners' bags and backpacks.
The church attack came less than two weeks after another attacker ploughed a 19-tonne truck into a massive crowd celebrating Bastille Day in the Riviera city of Nice, killing 84 people and wounding more than 300 others.
Hamel is to be buried in a ceremony attended only by close family members, at a location that has not been revealed.
The frail octogenarian became the latest victim of terror in France when the two jihadists stormed his church in the small Normandy town of 30,000 people.
Abdel Malik Petitjean and Adel Kermiche had pledged allegiance to the Islamic State group and both were shot dead by police after a tense hostage drama in which a worshipper was left seriously wounded. Three other hostages escaped unharmed.
The attack stunned France's religious communities, sparking fears of tensions in a country with a population of some five million Muslims, Europe's largest.
The series of jihadist attacks in France has raised tough questions about security failures, but also about the foreign funding of many mosques.
Cazeneuve said Monday that authorities have shut down around 20 mosques and prayer halls considered to be preaching radical Islam since December.
"There is no place ... in France for those who call for and incite hatred in prayer halls or in mosques," the minister said.