Many among the mourners were members of Malik Ishaq's militant Lashkar-e-Jhangvi group and chanted anti-government slogans calling for revenge.
The funeral in Ishaq's hometown of Rahim Yar Khan in central Pakistan was held under tight security, according to police officer Ashfaq Gujjar.
Ishaq's Lashkar-e-Jhangvi group has links to the Taliban and to al-Qaeda, and allegedly masterminded the killing of scores of minority Shiites across Pakistan.
He was killed with 13 other militants, including his two sons, in yesterday's assault on the convoy, when he was officially in police custody.
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But provincial minister, Shuja Khanzada, described Ishaq as a "symbol of terror" and said he was behind many acts of terrorism in Pakistan but he had been freed by courts in the past due to lack of evidence.
Ishaq was so feared in Pakistan that frightened judges hid their faces from him and even offered him tea and cookies in court.
Arrested in 1997, Ishaq remained in prison for about 14 years but could not be convicted in any of over 200 cases, including the killings of 70 Shiites.
He was believed to be in his mid-50s and had operated freely for years in Pakistan as its intelligence services helped nurture extremist groups in the 1980s and 1990s to maintain influence in Afghanistan and counter India.
However, Ishaq proved his usefulness to the army in 2009, when he was flown from jail to negotiate with militants who had stormed part of the military headquarters in Rawalpindi and were holding hostages.