They chose a private farewell for one of Africa's most divisive figures after a weeks-long dispute with the administration that forced him from power.
To cries of approval, the priest said: "This man lives forever," and added: "This gathering is a paradox. We are mourning at the same time we are celebrating because this man lived his life in a manner that many of us would want to emulate."
Later, standing by the coffin, he prayed: "God, take pity on him. Don't judge him harshly."
Mr Mugabe died this month in Singapore aged 95 after leading Zimbabwe for nearly four decades before being pushed into a shocking resignation as thousands danced in the streets.
His coffin, draped in the country's flag, was carried into a tent for the service in Zvimba by military pallbearers as his black-veiled wife Grace looked on.
The tent displayed a photo of Mr Mugabe holding up his fist in a classic gesture of defiance, while a floral arrangement in front of the casket spelled "Dad."
Many mourners wore T-shirts saying "Liberator" and "Torch bearer".
Some of Mr Mugabe's political rivals, including opposition figures who were routinely arrested or harassed during his 37-year rule, attended the service while long-time colleagues did not.
Notably absent were senior officials from the ruling party that he led for more than four decades, including during the fight for liberation.
Just a handful of people in the gathering of some 200 wore party regalia, a sign of how the bookish, combative former leader died isolated from the people he called comrades for much of his adult life.
Mr Mugabe's family had earlier agreed to a government request to bury him at the National Heroes Acre shrine in the capital Harare, but only after a hilltop mausoleum was built to set him apart from the rest.
But the government on Thursday abruptly announced the family had changed their minds, leaving it with scaffolding around the partially completed memorial.
A spokesman for the ruling Zanu-PF party, Simon Khaya Moyo, called the choice of a private burial "most unfortunate".
In a statement, he added that "we indeed respect the wishes of families of deceased heroes, hence we are saddened when manoeuvres that border on political gimmicks begin to unfold on an issue concerning an illustrious liberation icon".
President Emmerson Mnangagwa, a once-trusted deputy who helped oust Mr Mugabe from power, did not attend the burial. State-run media reported the government was represented by the home affairs minister.
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