Mr Kinfe had held the post as head of security and intelligence since rebels of the Ethiopian People's Revolutionary Democratic Front (EPRDF) overthrew Marxist dictator Mengistu Haile Mariam in May 1991.
Kinfe Gebre-Medhin, a close ally of Prime Minister Meles Zenawi, was shot in the back by an army major as he entered the Ethiopian armed forces officers' club in Addis Ababa.
The motive of the killing remains unclear.
Mr Kinfe had held the post as head of security and intelligence since rebels of the Ethiopian People's Revolutionary Democratic Front (EPRDF) overthrew Marxist dictator Mengistu Haile Mariam in May 1991.
He belonged to the 30-member central committee of Mr Meles' Tigray People's Liberation Front, the core group in the four-member coalition that makes up the EPRDF.
He was among those who backed the prime minister in a power struggle that culminated in March with the expulsion of 12 members who criticised Mr Meles' conduct of the two-and-a-half year-long border war with Eritrea that ended last December.
Unclear motives
Thousands of mourners clad in black wept as the coffin, draped in the green, yellow and red Ethiopian flag, arrived at Addis Ababa's Orthodox Trinity Cathedral, escorted by a military guard of honour wearing black armbands.
The mourners included Prime Minister Meles, President Gidada Negaso, and high-ranking government officials and members of the diplomatic corps.
The Patriarch of the Ethiopian Orthodox Church, Abune Paulos, described Mr Kinfe in a eulogy as "a patriot who dedicated his life to peace".
Mr Kinfe was one of Ethiopia's most heavily-guarded people.
It is unclear why Major Tsehaye Wolde-Selassie killed him, although sources close to the late intelligence chief have spoken of a personal grudge.
Others blame dissenting groups which were expelled from the government as being behind the assassination.
Eritrea, formerly an Ethiopian province, became independent with Ethiopian support in 1993.
But border and economic disputes between the two countries erupted into a war in which tens of thousands of soldiers died.