Private Jake Kovco, an experienced marksman and paratrooper, died on April 21 from a gunshot to the head, sustained in Baghdad.
The mourners joined Private Kovco’s family for a service attended by Australian Prime Minister John Howard and Australian Defence Force chief Angus Houston.
His widow Shelley Kovco told the gathering her husband will be sorely missed, and the Special Air Service (SAS) missed out on a “bloody good soldier.”
She told the packed hall at the Briagalong Mechanics' Institute, where the funeral was held, of her romance and marriage to the young soldier, who was serving with Australian security forces in Iraq.
"We knew we were meant to be together," she said.
"We got engaged after three months and got married in December after that."
She said Pte Kovco was the proud father of four-year-old Tyrie and 11-month-old Alana.
"He was the best father," she said, wiping away tears.
"He was so proud, he used to say Tyrie was his little man," she said.
The service also heard from the 3RAR commanding officer, Lieutenant Colonel Mick Mumford.
"The need to give your life for your mates and your mission is something that every soldier in 3RAR accepts without question," Lt Col Mumford said.
"That was the life that Jake wanted and that was the life that he enjoyed.
"His role in Iraq was not to kill but it was to protect and his commander in Baghdad reports that he was a vital member of that team."
The Reverend Tim Booker, Chaplain of the Third Royal Australian Regiment, to which Private Kovco belonged, read a psalm and recited the Lord's Prayer to those assembled.
Dressed in uniform and wearing black armbands, dozens of members of Private Kovco's 3RAR battalion formed a guard of honour after the service.
Mourners listened to music including Nirvana's Come As You Are and James Blunt's Goodbye My Lover, and saw a slide show of Pte Kovco's life.
After the funeral, Mr Howard and Defence Minister Brendan Nelson spoke to Shelley Kovco and comforted mourners.
At the nearby Sale cemetery, an honour guard of 110 3RAR soldiers, in full uniform and wearing black armbands, lined an avenue where Pte Kovco's silver coffin, draped in an Australian flag, was carried on to a dark green gun carriage.
The army band played a solemn march as the carriage was escorted to the burial plot, and the Roulettes, the RAAF's aerobatic display team, performed a flyover.
A gun salute could be heard from the private burial, as could a lone bugler.
Meanwhile, in a pre-dawn service timed to coincide with the Briagalong funeral, Australian troops gathered in Baghdad to remember their comrade.
A coronial investigation is under way to determine how Pte Kovco died, as well as a full military inquiry into the shooting and a repatriation bungle which saw the wrong body initially delivered home.
Bullet missing
Meanwhile, a newspaper report said a post-mortem examination of Pte Kovco's body revealed no evidence of burn marks near the wound, indicating the gun that killed him was not fired close to his head, making suicide is a less probable cause of death.