There were emotional scenes as several thousand Christians buried their leader in his home village near Faisalabad.
Earlier, hundreds turned out for a church service in the capital. Prime Minister Yousuf Raza Gilani told them his colleague had been "very rare".
Wednesday's assassination in Islamabad was the second this year of a Pakistani politician who wanted to reform the controversial blasphemy laws.
In January, Punjab Governor Salman Taseer, who had also opposed the law, was shot dead by one of his bodyguards in the capital.
The blasphemy law carries a death sentence for anyone who insults Islam. Critics say it has been used to persecute minority faiths.
Observers say Mr Bhatti's killing leaves Pakistan's Christians without their most prominent voice and threatens to silence debate on the blasphemy law. The government is accused of giving in to religious hardliners.
Protests Stringent security precautions were in place for the funeral.
Roads were closed and police and paramilitary forces deployed around Fatima Church in the capital for the service for Mr Bhatti, 42, who was a Roman Catholic.
Marksmen took up positions on the roofs of nearby buildings ahead of the Mass.
The prime minister praised a man he said was devoted to helping the downtrodden.
"People like him, they are very rare," Mr Gilani told the packed congregation. "All the minorities have lost a great leader. I assure you, we will try our utmost to bring the culprits to justice."
Top government leaders, MPs, foreign diplomats and Christians joined relatives and friends at the service.
Mr Bhatti's coffin - wrapped in the green and white of Pakistan along with a flag of the all-Pakistan Minorities' Alliance - was then flown by helicopter to Faisalabad.
In the minister's native village of Khushpur nearby, black flags flew for the murdered minister's burial.
"The killers have snatched our hero," said Mr Bhatti's brother, Sikander, the Associated Press (AP) reports.
So large were the crowds that the burial was delayed by several hours, the BBC's M Ilyas Khan reports from Khushpur.
Pakistan is observing three days of mourning and there have been protests by angry and frightened Christians across the country, condemning the killing.
Christians say their community, and other minorities, no longer feel secure. Few believe government promises the killers will be brought to justice.
"They have neither the ability nor the will," one Khushpur mourner, Nasreen Gill, told AP.
The BBC's Syed Shoaib Hasan in Karachi says Mr Bhatti has become a martyr for the local Christian community because of his outspoken stance on the blasphemy laws.
But our correspondent says the government seems to lack his courage to take steps to amend what many are now calling Pakistan's black law, and the liberal intelligentsia feel under siege.
In January, an MP from the governing Pakistan People's Party (PPP), Sherry Rehman, dropped a bill to reform the law, because her party leaders would not back it.
She has all but disappeared from view amid concerns for her security.
The apparent ease with which Mr Bhatti, a PPP leader, was killed has caused great concern.
He had just left his mother's home in a suburb of the capital when several gunmen surrounded his vehicle and riddled it with bullets in daylight, say witnesses.
The minister's driver was spared before the gunmen escaped.
Mr Bhatti was without guards or the security escort that is standard for all Pakistani ministers, and it is not clear why. Police and federal officials are investigating.
Even before his assassination, Mr Bhatti had predicted his own death in a chilling video. He told the BBC he had been denied more protection but would defy the death threats from Islamist militants for his efforts to reform the blasphemy law.
The law has been in the spotlight since a Christian, Asia Bibi, was sentenced to hang in Punjab last November. She denies insulting the Prophet Muhammad.
Christians make up an estimated 1.5% of Pakistan's 185 million population.