The 36-year-old father was killed along with colleague Geoffrey Keaton on Dec. 19 after a burnt tree fell in the path of their firetruck, causing it to roll.
A third firefighter was killed in a separate incident in late December in what authorities described as a "fire tornado".
Fires have razed more than 8.6 million hectares (21.3 million acres) of land across Australia, killing 25 people and destroying or damaging thousands of homes, most in the southeast.
Prime Minister Scott Morrison, who has faced some criticism for his response to the fires, attended the funeral in Sydney.
A firetruck from the suburb of Horsley Park, where O'Dwyer was stationed, was inscribed with his name in white letters, a Rural Fire Services photograph from the funeral showed.
Dozens of volunteers formed a guard of honour as the fire truck and hearse went past, media reported.
O'Dwyer's young daughter Charlotte received her father's service medal from the fire services commissioner.
In emotional scenes, the toddler wore her father's medal and a fire helmet in front of his coffin.
A funeral was held for O'Dwyer's colleague, Keaton, last week, where his young son stood quietly, sucking on a pacifier, while receiving his father's medal.
The medals were awarded by New South Wales Rural Fire Services Commissioner Shane Fitzsimmons who lost his own father 20 years ago in a bushfire during a hazard-reduction burn, according to media reports.
Lobby group Business Council of Australia said it would set up an A$25 million ($17.3 million) trust that could be used to pay for the education of children who had lost parents while volunteering in disasters.
