Smith, 53, was gunned down by Cedric Anderson, also 53, when he opened fire at North Park Elementary School on April 10. Two of her students were also shot, 8-year-old Jonathan Martinez, who died, and 9-year-old Nolan Brandy, who survived. Anderson then took his own life.
The superintendent of the city school district, as well as the city's mayor attended the funeral on Saturday.
"San Bernardino is hurting, but God is about to use you all greatly. God is about to do something for you all," Bishop Robert Douglas said.
Smith's brother played the saxophone and one of her sons played the guitar. Toward the end of the service, a recording of Smith singing was played.
The funeral was nearly four hours long, with not only family members and friends speaking, but fellow teachers. Many of them were in their own classrooms at the time of the shooting.
"I texted her immediately. It was just a few minutes after I heard. I texted her, 'Are you OK?' I didn't hear back and I knew. So I simply texted back, 'praying,'" one teacher said.
Actress Holly Robinson Peete also spoke during the funeral and announced that her nonprofit, the HollyRod Foundation, would be renaming an award in honor of Smith.
Smith's mother, Irma Sykes, also spoke about her daughter's strong faith in God.
"I know that Karen is in the presence of the Lord. I know that Karen's work is finished. If it wasn't finished, God would not have taken her home," she said.