Louisa Vesterager Jespersen, 24, was killed alongside 28-year-old Maren Ueland from Norway, as they camped in the Atlas Mountains last month.
Their bodies were found by other tourists the next day, with Moroccan authorities saying they had been beheaded in a “terrorist” act.
The 45-minute funeral was held on Saturday at a church in Ikast, in Denmark’s Mid Jutland region.
According to newspaper BT, more than 400 people attended and an extra room had to be opened to accommodate the numbers.
Danish prime minister Lars Lokke Rasmussen said: “Though the pain is unbearable, we must not succumb.
“We must remember who we are, what we are made of, and what we stand for.”
Twenty-two people have been arrested in Morocco in connection with the murders, including four main suspects believed to have been inspired by Islamic State.
Morocco’s counter-terror chief Abdelhak Khiam has said none of the four had contact with members of the terrorist group in Syria or Iraq, however.
The two young women, who had been studying outdoor activities and tourism at the University of Southeastern Norway, arrived in Morocco on 9 December for what was supposed to be a month-long holiday.
Their bodies were found just eight days later.
Ms Ueland’s funeral will be held in Norway on 21 January.
Tourism accounts for 10% of Morocco’s national income and the country has generally been safe from jihadist attacks since a 2011 bombing in Marrakech killed 17 people, most of them European tourists.
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