Taking their cue from the 81-year-old pontiff, thousands of the faithful gathered inside the church lit their own candles, the flames flickering in the immense interior.
Outside, on a mild spring night in Rome, tens of thousands more followed the ceremony on four giant screens erected in St Peter's Square.
During the ceremony Benedict also administered the sacraments of baptism, confirmation and first communion to five converts - three women and two men - including nationals from China, Italy and the United States.
In his homily Benedict said that through Jesus' resurrection mankind can hope for eternal life, but this is something that can only be achieved by first experiencing death.
"The Easter candle burns, and is thereby consumed: Cross and resurrection are inseparable," the pontiff said, referring to Jesus' crucifixion.
"From the cross, from the son's self-giving, light is born, true radiance comes into the world," Benedict said.
This year's Easter festivities in Italy have been tinged with sorrow for the victims of a devastating earthquake that struck the country's central Abruzzo region on Monday.
During a Friday evening Way-of-the-Cross procession over which he presided, Benedict repeated his condolences for the dead, offering prayers that their souls may rest in peace.
Earlier in the week, the German-born pontiff said he planned to visit the region hit by the tremor "as soon as possible".
About 17,000 people evacuated from L'Aquila and other badly damaged towns have spent their nights in tent shelters set up by authorities.
Benedict has donated 500 chocolate Easter eggs to be distributed to children staying in the tent shelters, the Vatican said.
Benedict is scheduled to celebrate Easter Mass on Sunday in St Peter's Square. He will also impart his traditional Urbi et Orbi, "to the city and to the world", blessing and message.