On the Mount of Olives and overlooking the Old City of Jerusalem, Gavriel and Rivka Holtzberg were laid to rest.
Thousands of religious Jewish mourners turned out to pay their respects. Earlier in the day outside the ultra-Orthodox Chabad movement's headquarters near Tel Aviv, a moving ceremony was held with leading rabbis delivering eulogies.
First to speak was Chabad movement's senior rabbi, Mordechai Shmuel Ashkenazi: "Why? Why? Jews who dedicated their lives to God!" he cried out in front of a crowd that included Israel's President Shimon Peres.
The young couple were gunned down during the bloody siege of the Chabad House in Mumbai, India, which they had run for the last five years. Gavriel, who was 29 and had dual U.S. and Israeli citizenship, was born in Israel but brought up in New York. His wife, 28, was Israeli.
The couple's young son, 2-year-old Moshe, was rescued from the Mumbai carnage by his Indian nanny, Sandra Samuel. She hid in a cupboard as the attack began. When she heard Moshe crying, she emerged from her hiding place to discover the little boy standing over the bodies of his parents. She then managed to escape from the building.
Television pictures showed the little boy in his nanny's arms covered in blood.
The couple is also survived by an older child who has a terminal illness, Tay-Sach's disease.
The orphan boy's tragic story has united Israelis in grief and has dominated every newspaper and television bulletin. His grief-stricken face adorns the front pages of every Israeli newspaper.
In Mumbai, the city's Jewish community held a ceremony to say goodbye to the young couple before their bodies were flown back to Israel. The child, comforted by his grandmother, repeatedly called out for his dead mother.
The nanny, Sandra Samuel, was given a visa to accompany Moshe back to Israel. It is unclear how long she will stay.
Victims of Mumbai Terror Assault
An appeal has already been launched to reopen Mumbai's Chabad House. Rivka Holtzberg's parents have volunteered to run it until new emissaries can be found.
The Holtzbergs were among six Lubavitcher Jews who died in the terror assault. Others included another American, Leib Teitelbaum, a 38-year-old New Yorker who lived in Israel. Teitelbaum had gone to Mumbai to supervise kosher food preparation.