The Hamburg church remembered the life of the Cameroon-born teenager, known as Florent Prince N.
He had been raised as a Christian but converted to Islam and later became radicalised.
The multi-faith service was held at St Pauli Church, where he used to worship.
It was organised by the Protestant church pastor, Sieghard Wilm.
Florent used to be an active member of the church but became radicalised and travelled to Syria in May 2015.
He later changed his name to Bilal.
Pastor Wilm remembered the teenager: "I can tell you as a pastor at St. Pauli, that I have also laid to rest more killers.
"A man remains a man.
"Even a person who has offended against someone.
"Even such a man has relatives who mourn him."
Florent was killed after he sent an audio message that claimed he was unhappy with IS.
The decision to hold a funeral for the teenager has not been welcomed by all and the church has fallen under heavy criticism.
The teenager's mother still attends church.
