The 19-year-old, from Burntwood in Staffordshire, launched an appeal in aid of the Teenage Cancer Trust but died this month.
His fundraising total hit the Â£4m mark earlier.
His mother Jane said the memorial service at Lichfield Cathedral was a "celebration of his life".
Stephen's body arrived on a horse-drawn carriage just before 19:00 BST.
A floral display spelling out 'STE' led the funeral procession from his home in Burntwood, Staffordshire, to Lichfield Cathedral.
The coffin was then moved inside the cathedral for a short service.
Speaking inside the cathedral, The Dean of Lichfield, the Very Reverend Adrian Dorber, said: "Stephen's all too brief life has shown us the triumph of hope.
"In the last few weeks he's won the hearts and minds of people across the world and we are all the better for it."
Stephen was diagnosed with terminal cancer at the age of 15. He drew up a "bucket list" of things he wanted to achieve before he died.
This led to him completing a skydive and playing drums in front of 90,000 people before the Uefa Champions League final at Wembley.
He originally wanted to raise Â£10,000 for the Teenage Cancer Trust but when his condition deteriorated, he set off in pursuit of Â£1m.
As his story spread, he earned a measure of global fame with donations from nearly 100 different countries.
Simon Fuller, director of services at the Teenage Cancer Trust, also spoke at the service and said it was a "great honour" and a "privilege" to know Stephen.
"I am deeply proud but not surprised by how the local community has pulled out all the stops to make this vigil happen," he said.
"Stephen's approach to cancer and his approach to life has inspired more people than we will ever know."
Mr Fuller ended his speech by leading a round of applause in honour of the "courage of Stephen" and other young cancer sufferers around the world.
At the end of the service, mourners gave Stephen's trademark thumbs up gesture as they filed silently past his coffin.
A 38-minute compilation of Stephen's favourite tracks was then played.
Emma Scholes, Stephen's head of year during his time at Chase Terrace Technology College, was among those who attended the vigil. She said it felt surreal to be at the event.
"He was such a fantastically happy person - I don't think I ever saw him without a smile on his face," she said.
A social media "thunderclap" - a message posted simultaneously on Facebook and Twitter - is due to take place at 11:00 on Friday.
Thousands of people have gathered for a vigil in memory of Stephen Sutton, the teenage cancer sufferer who raised millions of pounds for charity.