Maia and Rina Dee, 20 and 15, were killed on Friday when suspected Palestinian gunmen opened fire on them in their car in the Jordan Valley.
Their mother, Leah, is in a critical condition following surgery.
The attack came amid soaring Israeli-Palestinian tensions and violence.
The family live in Efrat, having moved from London nine years ago.
The car carrying the two sisters and their mother crashed after coming under fire. They were then fired on again at close range, Israeli media reported.
Israeli public broadcaster Kan reported that 22 bullet casings were found, apparently from a Kalashnikov assault rifle.
The victims were travelling in one of three cars on their way to Tiberias in the Galilee for a family holiday.
Israeli military personnel blocked roads in the area and said they had ‘started a pursuit of the terrorists’ responsible.
Speaking to the BBC on Saturday evening, Rabbi Dee described his daughters as beautiful, smart and popular.
He said he had not been able to sleep since their deaths.
‘Every time, I had nightmares and woke up,’ he said, ‘but the reality was worse than the nightmare, so I went back to sleep. Recurring nightmares… that’s how it went.’
The low rhythmic songs swelled and swayed with the crowd, who were packed beneath the white rafters in the prayer hall at a cemetery in the settlement of Kfar Etzion.
At the front, by a low podium, the family gathered, talking together and holding each other for long moments in silence.
The bodies were brought out, one covered in black cloth, one in blue – a Star of David embroidered on each, in gold and silver.
They were embraced by their father, Rabbi Leo Dee, originally from Radlett in the UK.
He then sat back, his face contorted in pain, his hands reaching out to touch his remaining three children.
Rabbi Dee also spoke, questioning how he would explain to the girls’ mother what had happened to their ‘two precious gifts’ when she wakes up.He told those assembled that ‘today the Jewish people have proven we are one’.
‘A simple, quiet family is devastated,’ he said.
‘The whole country hurts.’
Israel’s national security minister, Itamar Ben-Gvir, was among the mourners.
