A 24-hour curfew has been imposed on the town by police.
Tensions have been high in Wukari since February, when a row over a football dispute set off sectarian rioting.
Local reports say that Friday’s funeral was being held by the predominantly Christian Jukun ethnic group.
As the mourners passed through a Muslim area of the town they began chanting slogans which angered the residents there, say the reports.
One aid worker told the AFP news agency that 20 bodies had been collected so far.
“We are still going round the town in search of more bodies,” he said, speaking on condition of anonymity.
Joseph Kwaji, a spokesman for the Taraba state police, said the situation was now under control and police were “awaiting a comprehensive report”.
He said another 30 people had been seriously injured.
The violence came a day after a panel was set up to investigate clashes in February in which several people died.
That violence was sparked by a row over which ethnic group was entitled to play on a football pitch in the town.
There is a long history of tensions between Nigerian Muslims, who mainly live in the north, and Christians who mostly live in the south along with followers of traditional animist religions.
But there have been increasing outbursts of violence, amid an Islamist insurgency in the north which has forced thousands of people to flee their homes.
Last month, almost 200 people were killed in the northern town of Baga, as the military attempted to tackle the Boko Haram Islamist extremist group.
The army put the number killed at 37.
Rights groups have urged the government to investigate allegations of soldiers using excessive force in the town and destroying more than 2,000 homes.