A procession led by scores of motorcycles carried the coffin of the 36-year-old slain Buddhist man through the heart of Mandalay, as anger grew following unrest in which a Muslim man was also killed.
The violence on Tuesday and Wednesday saw mobs wielding airguns, swords, rocks and other weapons go on a rampage through the central metropolis.
It was the latest in a string of deadly religious clashes that have plagued the former junta-run nation for two years, prompting warnings that the country's fragile transition to democracy could be imperilled.
An AFP reporter at the scene said there was a relatively light security presence in central Mandalay despite the large crowds.
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The wife of the Buddhist victim, who was attacked on Wednesday evening, told AFP that she could not understand why the father of her three children was targeted.
"They killed him brutally," she said as she prepared for the funeral.
A friend of the dead man, who was with him at the time of the attack, showed AFP injuries on his hand that he said were slash marks from a "sword" used by a group of Muslims to kill his friend.
A funeral for the dead Muslim man, a popular local bicycle shop owner, was held Thursday, hours after he was killed while on his way to attend early morning prayers.
While Mandalay has a sizeable Muslim minority and also plays host to a group of nationalist Buddhist monks accused of stoking tension, it has not suffered religious unrest on this scale before.
Police sources told AFP they were boosting security measures as a precaution in other cities, including the commercial hub Yangon which has a diverse population of religious and ethnic minorities.