He knelt in front of the Stone of the Anointing, where Jesus' body is said to have been prepared for burial after the crucifixion, and prayed in the tomb where Christians believe his body was interred for the three days before the resurrection.
He then led prayers in the church, which he said would conclude his pilgrimage, telling the congregation not to lose hope.
The Pope said the resurrection "reassures us that God can make all things new, that history need not be repeated, that memories can be healed, that the bitter fruits of recrimination and hostility can be overcome".
He added that there could be a future of "justice, peace, prosperity and co-operation... for the whole human family".
The BBC's David Willey, travelling with the Pope, says that having dealt with contentious political issues throughout the week, the final day of the Pope's visit to Israel is to be devoted to purely religious engagements.
The church which was situated outside the city walls in ancient times but today lies in the heart of old Jerusalem in the middle of a bazaar, shops and mosques, as well as other Christian churches commemorating the events of 2,000 years ago.
The factions which jointly run the church frequently argue about the division of the different chapels of worship in the huge edifice.
Our correspondent says that Israelis hope that Pope's visit - the highlight of his final day here - will boost pilgrim tourism.
At a later farewell ceremony, President Shimon Peres thanked the Pope for his visit, calling it "a profound demonstration of the enduring dialogue" between Jews and Christians.
He said his presence carried "substantial weight", particularly the Pope's statement that the Holocaust must not be forgotten.
The Pope prayed for peace at the holy Jewish site, the Western Wall
The Pope's busy tour has included visits to sites sacred to all three monotheistic religions.
Earlier this week, he became the first pope to visit the Dome of the Rock, the Islamic mosque built on the site known to Jews as the Temple Mount.
He also prayed for peace at the Western Wall, one of the most holy places in Judaism, and travelled into the occupied West Bank to hold an open air mass in Manger Square, outside the Church of the Holy Nativity, said to be where Jesus was born.
On Thursday, he held another Mass in Nazareth, home to a large Arab Christian community and the reputed boyhood home of Jesus.
The Pope's many speeches during the tour have included several strong political statements, including his assertion of the rights of Palestinians to a sovereign homeland.
But at the Mass in Bethlehem, he urged Palestinian youth to resist resorting to violence as a means of achieving their "legitimate aspirations".
He has faced criticism in the Israeli media for failing to express sufficient remorse for the Holocaust and over his alleged membership of the Hitler Youth as a teenager.
The Vatican at one point denied he had ever been a member, which appeared to contradict the Pope's own memoirs.
The Pope flew back to Rome on Friday, well before the beginning of the Jewish Sabbath.
Have you seen Pope Benedict during his tour of the Middle East? Have you attended a papal Mass in the region?
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