Hanh, who left in 1966 and lives in France, was first allowed to return in 2005 by the communist government, which permits several religions under state supervision.
"We pray for the dead of both sides," Hanh said in a sermon at the Vinh Nghiem Pagoda in Ho Chi Minh City.
The war ended in the city formerly called Saigon on April 30, 1975 when troops of communist North Vietnam overthrew the U.S.-backed South Vietnam government and unified the country.
Processions of hundreds of monks and nuns in brown and gold robes filled the pagoda as Hanh, seated on a dais in front of a large neon-illuminated icon of the Buddha, delivered a sermon on reconciling oneself to the death of loved ones.
"Many people still feel bitterness over the war," said Vu Thi Quy, 75, at one ceremony. She said she donated $8,000 last year to monks at another pagoda to pray for those killed in the war and its aftermath, including her father-in-law and a daughter.
Hanh began a three-month visit in February and will lead similar rituals in the central city of Hue and in Hanoi.
He was a leader in a movement of Buddhists in South Vietnam in the 1960s which called for a negotiated end to the conflict. He has attracted tens of thousands of followers to his monasteries in France and the United States, becoming one of the most influential Buddhist figures in the West.
Few in the crowd were aware of the role Hanh had played in the 1960s, or knew of the movement or its church, the Unified Buddhist Church of Vietnam (UBCV), which is outlawed and refuses to operate under state supervision.
Several of Hanh's former colleagues have spent years in jail and under house arrest. The UBCV's international spokesman in Pairs denounced Hanh's return to Vietnam.
Many who attended the weekend's rituals were attracted by Hanh's fame in the West.
"I just know that Hanh is one of the 60 most important Buddhist monks in the world," said Trang Tri Son, 30.
Hanh has been trying to bring his philosophy of "mindfulness" to a Vietnamese audience and his books are sold in Vietnam.
Last Thursday, Hanh drew a crowd of several hundred to a talk with Vietnamese businessmen at a suburban country club.
"It's interesting to learn how to combine Buddhism into our business life," said Nguyen Thai Hoang, 25, who co-founded a stationery company last year.