Hundreds crammed in to Our Lady of the Holy Rosary church in Rochester, New Hampshire to pay tribute.
The service was led by the Bishop of Manchester Peter Libasci who praised him for acting out his faith by bringing the suffering of people around the world into the spotlight.
Talking about his decision to return to the region the clergyman said: "Jim went back again that we might open our eyes.
"That we might indeed know how precious is this gift. May almighty God grant peace to James and to all our fragile world."
Bishop Peter also read out a letter from the Vatican expressing the condolences of Pope Francis before praying for another journalist, Steven Sotloff, and all captives.
Following the service, the parents of James Foley released details of a letter James had dictated to a fellow hostage who was due to be released.
Because all letters were confiscated, his cell mate memorised the message before retelling it to his relatives.
In it he said: "I know you are thinking of me and praying for me.
"And I am so thankful. I feel you all especially when I pray.
"I pray for you to stay strong and to believe. I really feel I can touch you even in this darkness when I pray."
Meanwhile, another American journalist has been freed from captivity.
The US State department has confirmed Peter Theo Curtis, who had been held by the terror group Jabhat Al-Nusrah in Syria for two years, has been released.
The reason for the release in unknown.