The boy, who was thought to be no more than a few weeks old, was found in Spen Brook, off Carr Lane, Kirkham, on 1 October last year.
Despite appeals by Lancashire Police, the baby's mother has not come forward.
The funeral, which was arranged through donations by local businesses, began at St Michael's Church, Kirkham, at 17:00 BST.
Local people initially raised more than £1,000 to pay for the funeral, but businesses stepped in to offer their services free of charge.
The money raised will now go to local children's charities.
Detectives believe the baby was no more than a month old and had been born at full-term.
It is thought his body had been in the water for no more than five days when he was discovered by a dog walker.
'Always be remembered'
A union jack towel, a green towel with a "Renaissance" label and a discoloured fleece which was originally blue and white were found near the body.
Police have made repeated appeals for the baby's mother to contact them and the case has featured on BBC Crimewatch and This Morning.
Det Ch Insp Andrea Barrow, from Lancashire Constabulary's major investigation team, said: "It's very sad that we've not been able to find out what happened to this little boy up to now, but I must stress that this is very much a live investigation.
"We are all committed to finding out what happened to this little boy and our work will continue."
The baby's small blue coffin was carried into church by a police officer as mourners looked on.
The service was performed by the Reverend Rick Bunday and featured readings from three local primary school head teachers and Det Ch Insp Barrow.
The baby was buried in the churchyard with a headstone that reads "baby boy" and a pledge that he will always be remembered.
During the service, Mr Bunday said they were marking "the loss of a life short-lived yet significant".
Mayor of Kirkham Elaine Silverwood said there was "real sadness" in the town.
"The fact that the little boy will be in our local churchyard means that he is still close to us and will always be remembered.
"We do feel that he is part of our community, we are acting as a sort of a family to him, really, because he hasn't got one.
"That is important to us."
One Kirkham resident who attended the service said: "A lot of people from Kirkham have come, everyone's been talking about it over the last couple of days, and it's just to give him the send-off that he deserves really."
Another said: "At the end of the day we've got grandchildren ourselves and we wouldn't like that to happen to any of ours so this is why we've come today to pay our respects."