About 1,000 mainly Afrikaner mourners packed the church and a loudspeaker broadcast the service to followers outside, many of them in paramilitary gear, who could not fit into the building.
Mourners in the church sang Die Stem, an Afrikaans song that was the national anthem during the apartheid era.
At the same time, farm workers and trade unionists opposed to Terreblanche held their own mass meeting in a nearby township to ensure workers and local communities "remain disciplined".
Haru Mutasa, Al Jazeera's correspondent in Ventersdorp, said: "At the church service there were mainly white people, AWB members and sympathisers of Terreblanche.
"At the township, it was all black people. They were told to basically stay away from the venue - a sign of how tense things are in this town.
"Of the black people I spoke to in the township, no one sympathised with him at all, and many said he got what he deserved. At the same time, you have a white community, the Afrikaners, who feel sidelined in the new South Africa.
"This town is still racially polarised, especially out on the farms where you have stories of black farmworkers suffering at the hands of white farmers and stories of white farmers being murdered by their black farmworkers.
"People here are tense. The key thing is how this issue is managed in Ventersdorp.
"If it isn't managed carefully, quickly and sensitively then this place could erupt in racial clashes which no one in the country wants to see happen, especially given the World Cup here is just around the corner."
The AWB leader's coffin was draped in the movement's flag, which closely resembles the Nazi swastika. His body was to be buried on his farm later on Friday.
Terreblanche's murder opened bitter racial wounds 16 years after the end of white minority rule under apartheid, with the AWB initially warning of revenge and tensions flaring outside the court that charged the suspects.
|Terreblanche's AWB seeks to create an all-white republic within South Africa [AFP]
But the government called for calm, while the Terreblanche family appealed for a quiet ceremony with no political activities.
Bheki Cele, the national police chief, visited the AWB headquarters ahead of the funeral and told reporters afterwards: "We agreed we hope the day will be fine. We know it's a very emotional day so we take that one on board."
The police chief refused to racialise crime, saying: "Last year we lost a lot of people in South Africa. We lost 18,000 people. We don't look whether they are white or black."
But the AWB has seized the opportunity to highlight grievances over crime and repeat its calls for a separate white homeland, for which Terreblanche had campaigned.
Andre Visagie, a senior AWB member, told journalists that the movement would meet South Africa's police minister next week and "ask the government to give us our own homeland".
"We want to be free. We are not interested in being a part of this failure of South Africa," he said
"Our very very last resort would be violence, but we hope that we can go without it," he said.