The funeral was being held for the commander and six other fighters killed earlier in the day in a suspected US drone attack on what Pakistan officials said was a "Taliban training centre".
Tuesday's attacks came as the Pakistani army was preparing to launch an offensive against Baitullah Mehsud, the leader of the Pakistan Taliban.
Al Jazeera's Kamal Hyder, reporting from Islamabad, said: "There are reports that Mehsud himself was at the congregational prayer and escaped the attack.
"However, we are told that a number of people present at that particular moment were [also] killed.
"There were unconfirmed reports that the death toll is much higher because a number of the bodies are badly mutilated."
However, Qari Hussain, a close associate of Mehsud, denied reports that Mehsud had a close call and said many of the dead were civilians.
"Baitullah Mehsud was at a secret place at the time of the American missile attack, and the attack killed only five of our colleagues, and the remaining 45 slain men were villagers," he told The Associated Press news agency.
Pakistan officially objects to strikes on its territory by the pilotless US aircraft.
Questioned about the reported attacks, a US defence department official said: "There are no US military strike operations being conducted in Pakistan."
Pakistan's military mounted an operation earlier this month against Mehsud in South Waziristan, launching air raids and artillery barrages against suspected Taliban bases in the region.
The missile raids came on the same day that Qari Zainuddin, a key rival of Mehsud, was assassinated in the northwestern town of Dera, police said.
Zainuddin, a Taliban commander, had spoken out strongly against Mehsud and may have been about to mount a challenge against him.
Al Jazeera's Hyder said Tuesday's attack was likely to cause considerable anger in the country.
"It may play into the hands of elements like Mehsud because the attack took place on a funeral - there are cultural sensitivities," he said.
"Such attacks are likely to complicate the situation for the Pakistani military because they have to be equally sensitive to public opinion in that area - something that is not going to be helped by the drones."
Mehsud, an al-Qaeda ally, was accused of plotting the assassination of Benazir Bhutto, a former Pakistani prime minister, in 2007.
The US government had offered a reward of $5m for information leading to his location or arrest.
There have reportedly been more than 20 US drone attacks against targets in Pakistan so far this year, although Tuesday's strikes are the deadliest to date.
Frequent attacks by pilotless US drone aircraft have been heavily criticised by Pakistani leaders for killing innocent civilians and infringing upon national sovereignty.
The US considers Pakistan's tribal region, of which South Waziristan is a part, a hideout from where al-Qaeda and Taliban fighters launch attacks on US forces in Afghanistan.