Requiem Mass is being held in St Malachy's Church on Main Street.
The church is directly opposite her father's butcher's shop, and the flat above it where the fire broke out in the early hours of Saturday morning.
Her friends and teachers from Assumption Grammar, Ballynahinch, are among the many mourners.
Ellen had been due to sit her A-Level exams at the County Down school and had just been offered at the University of Liverpool.
The priest who led the funeral service, Fr Sean Cahill, told mourners: "Our memories of Ellen will always be of one young and vibrant.
"Her classmates, friends and teachers speak of her as lighting up any classroom she entered."
He said Ellen had an enthusiasm for sport and played camogie, football and ran cross-country.
She also played the drums and was a member of a folk choir.
The teenager died on the third anniversary of her mother's death.
Fr Cahill asked God to "lead her safely home to be with her mother, Nicola".
After the service, Ellen will be laid to rest in the family burial ground in Aughlisnafin.
The funeral of 18-year-old Ellen Finnegan, who died in a fire at the weekend, has been taking place in Castlewellan, County Down.