Militants manned checkpoints as Kantar's coffin, draped in the movement's yellow-and-green flag, was carried to its burial place in the capital's Ghobeiri area, a bastion of Hezbollah support.
"The Israelis still haven't learned that with all these assassination attempts on leaders they are committing a huge mistake," senior Hezbollah official Hisham Safiedine said.
A thick crowd chanted "Death to Israel! Death to America!" and waved the Palestinian, Lebanese and Hezbollah flags, as the coffin was carried to a mausoleum reserved for "martyrs".
Israel has welcomed news of Kantar's death without claiming responsibility for the air strike that killed him, allegedly with four missiles fired from Lake Tiberias in northern Israel.
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Shortly after Kantar's release from an Israeli prison in 2008, however, a top Israeli security official had warned he was a "target".
Hezbollah played a key role in Kantar's release after he had spent 30 years in Israeli jails, becoming known as the longest-serving Arab prisoner.
The militants shot dead Danny Haran, 28, and battered his four-year-old daughter Einat's skull with rifle butts.
Kantar was sentenced to five life terms plus 47 years for murdering the father and daughter and an Israeli policeman.
Shortly after his release, he joined Hezbollah.