In introductory comments, Dean Stephen Forde said: "Lyra was a person who broke down barriers and reached across boundaries.
"This was her hallmark in life, this is her legacy in death."
He said she was a child of the 1998 Good Friday Agreement which largely ended decades of violence and talked of the hopes for an end to the prejudices of the past and the possibilities of a new future.
Miss McKee's friend Stephen Lusty said her "starlight" filled the cathedral and he praised her as smart, kind and compassionate.
He said she was fearless and naive in her early days.
She supported him through dark times, when he was scared, lonely and isolated.
He said she often gave half her dinner money to a homeless person she had come across, making her late when she was due to meet him.
She was a "new age punk", the embodiment of the Troubles-era band Stiff Little Fingers' Alternative Ulster hit.
"She embodied the future of finding commonality, enjoying difference in others."
He said 40 years later her loss showed what it took to live in an Alternative Ulster.
They had been robbed of a talent destined to become a stateswoman, with only holes left behind.
Her friend said Miss McKee's lasting legacy should be peace.
"We have two choices, we can look into the holes and wait forever... or we can fill those holes today.
The cortege arrived outside St Anne's Cathedral earlier after passing Belfast's nearby Kremlin bar, a gay nightclub, where a number of people with rainbow flags were present.
The crowd applauded as the cortege arrived at the cathedral, with a white and pink floral heart carried in the hearse.
There was more applause from hundreds of people outside the cathedral as Miss McKee's coffin was carried inside.
Earlier: The death of Lyra McKee should mark a new beginning for Northern Ireland, a priest has told mourners.
Dissident republican gunmen who killed the Belfast-born journalist, 29, should lay down their arms, Father Martin Magill added.
He urged politicians at Northern Ireland's suspended powersharing administration to work together to produce a better life for young people.
Fellow journalists formed a guard of honour as the service for their murdered colleague began in Belfast.
Taoiseach Leo Varadkar, President of Ireland Michael D Higgins and Tánaiste Simon Coveney as well as UK Prime Minister Theresa May and Labour leader Jeremy Corbyn were among those who attended.
Ms McKee was killed by indiscriminate fire as she observed clashes between police and New IRA dissidents on the Creggan estate in Derry on April 18.
Her funeral was cross-community and mourners spanned both sides of the Irish border.
Catholic priest Fr Magill said: "I dare to hope that Lyra's murder on Holy Thursday night can be the doorway to a new beginning. I detect a deep desire for this."
The service of thanksgiving was held in the Church of Ireland's St Anne's Cathedral, a short distance from her north Belfast home.
Fr Magill said: "To those who had any part in her murder, I encourage you to reflect on Lyra McKee, journalist and writer, as a powerful example of 'The pen is mightier than the sword'.
"I plead with you to take the road of non-violence to achieve your political ends."
Since the killing many have condemned the culture of violence and coercive control practised by dissidents, the clergyman said.
"We need to send a very different message and so I appeal to those who have information about Lyra's murder but who haven't yet come forward to do so now.
"If you want to see an end to these brutal rules, and see a new society built on justice and fairness, on hope and not fear, then you can help build that society by letting the police know what you know."
He called on political leaders to break the Stormont negotiations impasse.
"I pray that Lyra's murder may be the catalyst needed for parties to start talking, to reform that which was corrosive in previous assemblies and to begin anew."
Those attending the funeral were asked to wear Harry Potter and Marvel Comics merchandise in tribute to the journalist's passion for both.
Members of the National Union of Journalists (NUJ) formed the guard of honour.
The congregation was led by Ms McKee's partner Sara Canning, 35, her mother Joan McKee, 68, brothers Gary and David and sisters Joan, Nichola and Mary.
Her family have paid tribute to a "gentle, innocent soul" whose "desire to bring people together made her totally apolitical".
The New IRA is an amalgam of armed groups opposed to the peace process and it recently claimed responsibility for parcel bombs sent to London and Glasgow in March.
Police believe the violence in Derry was orchestrated in response to an earlier search by officers aimed at averting imminent trouble associated with the anniversary of the Easter Rising.