Those being buried on Thursday included seven children and four women who all died when Israeli tanks fired on their home as they were sleeping on Wednesday morning.
The bodies were wrapped in the yellow flag of the Fatah movement and carried on stretchers among a vast crowd of mourners through the streets of Beit Hanoun.
Some mourners collapsed in grief.
One mourner, Abu Shabat, said: "All of us are feeling sad, and worried, too. We are going to bury this family and ask ourselves who is next? Me? My grandchildren? My neighbour?"
"We say, an eye for an eye and a soul for a soul. There will be no security in Ashkelon, no security in Tel Aviv or Haifa, until our people in Beit Hanoun are secured"
Abdul Hakim Awad,
The cemetery, which had been under construction, was hastily opened to accommodate the victims because no other cemetery in town had enough land to allow the victims to be buried together.
The bodies arrived in a convoy of 18 ambulances, which brought them from hospital mortuaries through the artillery-scarred cluster of apartment buildings.
The freshly dug graves were lined up in a single row, each marked by a concrete block. A Palestinian flag fluttered over each grave. Two Israeli unmanned aircraft buzzed overhead.
A Fatah official addressed the crowds through a loudspeaker, and pledged vengeance on Israel. Armed men also walked in the procession and fired their weapons into the air.
Beit Hanoun has been the focus of a week-long Israeli offensive in which more than 80 Palestinians have died, at least half of them civilians. Wednesday's shelling came 24 hours after Israeli ground forces pulled back from Beit Hanoun.
All of the dead belonged to the al-Athamnas family, a prominent family in town that includes several doctors and professionals. Family members said they had fled during the recent Israeli offensive, returning home after Tuesday's pullout.
Palestinian armed factions have called for the deaths to be avenged, while foreign governments have condemned the assault.
Abdul Hakim Awad, a member of the Fatah movement, said: "The killers in Israel, you will never be able to defeat one Palestinian child."
"We say, an eye for an eye and a soul for a soul. There will be no security in Ashkelon, no security in Tel Aviv or Haifa, until our people in Beit Hanoun are secured."
The bodies were wrapped in the
colours of the Fatah movement
Witnesses said that many of the dead were killed as they fled their homes after the first shells hit. The bombardment was the deadliest on Palestinian civilians in the past six years, and undermined the moves by Mahmoud Abbas, the president, to restart peace talks.
The 18 dead was the highest Palestinian civilian toll in a single incident since the current uprising against the Israeli occupation started in September 2000. The highest toll of Israelis was 29 killed in a Palestinian suicide bombing at a Passover gathering in March 2002.
"We are going to bury this family and ask ourselves, 'Who's next? Me? My grandchildren? My neighbour?”'
Immediately after the killings, the Palestinian leadership declared three days of mourning. Shops remained shuttered on Thursday.
Khalid Mishaal, the exiled leader of the Palestinians' ruling Hamas group, cancelled a ceasefire with Israel that has largely held since February 2005.
Hamas's military wing also called for attacks against American targets - an appeal that Hamas political leaders in Gaza did not endorse.
The UN Security Council was to meet in special session later on Thursday. Palestinians hoped for a condemnation of Israel, on top of the denunciations Israel absorbed from governments worldwide after the attack.
Meanwhile, Israeli police, fearing revenge attacks, have stepped up their alert level, mobilising forces across the country.
Israeli military officials said the artillery was aimed at a target about 500m away. A senior commander said artillery aiming devices had malfunctioned, though a formal investigation is still under way.