Jume Tahir was killed last week by three suspected Islamist militants.
Authorities say two of the assailants have since been killed and the third is in captivity.
The death of the imam came during the worst upsurge in violence in Xinjiang in years; more than a 100 people are said to have been killed in just a week.
Correspondent: Huey Fern Tay
Speaker: Ma Jinguo, a Muslim religious leader
HUEY FERN TAY: Jume Tahir was the imam of one of the largest mosques in China, the Id Kah, in Western China's Xinjiang province.
He was also a former member of the country's parliament, the National People's Congress, and often spoke out against violence in his home province.
Mr Tahir was found dead on Wednesday shortly after morning prayers.
The Xinjiang government says three men influenced by extreme religious teachings wanted to prove themselves by killing Mr Tahir. Two were shot dead by police and one was arrested.
Ma Jinguo, a Muslim religious leader, said on Chinese state television that he was angry Mr Tahir was murdered by what he called 'terrorists'.
MA JINGUO: He was a well read man who was respected. He was not corrupt. He was loved by everyone in Xinjiang and perhaps even every Muslim in China.
HUEY FERN TAY:Tensions between Uighur Muslims and Han Chinese have existed for a long time in Xinjiang. But violence has surged within the province over the past 12 months especially in the south, with reports of burnings and violent clashes between locals and authorities happening almost every month despite a heavy security presence. The city where Mr Tahir used to preach, Kashgar is in that region.
Locals have confirmed with the ABC that internet access was cut off in Kashgar on the day Mr Tahir was found dead.
UNIDENTIFIED PERSON: We can send text messages now. The internet was also cut off. We could only make and receive phone calls. We couldn't do anything but all these services were restored at night.
HUEY FERN TAY:The Chinese government blames religious extremists for instigating the violence in Xinjiang because they want the province to be independent. But others say there are underlying reasons for the lack of trust between Uighurs, Han Chinese and the government.
It's a very complex situation that's rapidly deteriorating.