Relatives of the group, who were shown being beheaded in a video posted on social media, gathered at St Mark's Cathedral in Cairo on Tuesday night.
After mass the families held candles during a vigil outside the church.
Leading the service Pope Tawadros II said: "Our brothers who died in these circumstances and lost their lives on this earth have gone to heaven.
"As we have heard and seen, they were steadfast in their Christian faith. We have seen how they asked for God's mercy and asked to join the kingdom of God as their last prayers before they died.
"Death is a meeting in heaven: it is being in the presence of God."
Pope Tawadros added that the murder of the young men was "something that is not acceptable by any religion or any person or any place, yet what happened to them is not death but they were martyrs of the faith. They kept their faith to the end."
He continued: "I am calling here on all those who do evil and violence and oppression to watch out for because you will not take anything with him to God except love."
Coptic Christians make up 10% of Egypt's 90 million people, making it the largest Christian denomination in the Middle East.
The men were killed on Monday by Islamic State militants in Libya after being kidnapped by the group in January.
An image showing them in orange clothes had the title "Revenge for the Muslim women persecuted by Coptic crusaders in Egypt".
Egypt has launched air strikes on IS targets in Libya in retaliation for the deaths.
Weapons caches and training camps were bombed to "avenge the bloodshed", military commanders said.
The UN Security Council is to meet for an emergency session on Libya to discuss what action to take.