The ceremony near the mountain village in the Kabyle region was converted into a scene of chaos by surging crowds of chanting mourners.
Hocine Ait-Ahmed was one of the first to rebel against French rule in 1954, sparking the war of independence.
Years later, he was forced into exile. He died on Wednesday in Switzerland aged 89.
Ait-Ahmed was the last of nine heroes of the independence war to die.
A state funeral was held in the Algerian capital on Thursday, which was broadcast live on TV.
However, his family refused to allow him to be buried alongside the other heroes in Algiers.
Instead, the burial took place in his home village 110km (70 miles) east of Algiers.
Ait-Ahmed had been a prominent critic of the military's control over the political system after independence from France in 1962.
Crowds attending his burial shouted "Algeria free and democratic", the slogan of the Front of Socialist Forces party founded by Ait-Ahmed.
The party remains active in the political opposition.
Tens of thousands of Algerians have attended the burial of national independence hero Hocine Ait-Ahmed.