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The coalition, which has come under increasing international scrutiny over alleged civilian deaths, denied any responsibility for the attack.
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"The toll is very high: more than 520 wounded and more than 100 martyrs," the spokesman of the health ministry in Sanaa, Tamim al-Shami, told rebel Almasirah television.
It was one of the deadliest attacks since the coalition launched a bombing campaign against the Shiite Huthis in March 2015.
Riyadh's key ally Washington promptly warned it had launched an "immediate review" of support to the Saudi-led coalition, and that its security cooperation with Saudi Arabia was "not a blank check."
The UN humanitarian coordinator in Yemen, Jamie McGoldrick, said aid workers were "shocked and outraged" by the attacks that hit a community hall in the capital Sanaa where mourners had gathered.
He called for an immediate investigation and said the international community must exert pressure to ensure civilians are protected.
"This violence against civilians in Yemen must stop immediately," said McGoldrick.
A "horrified and extremely disturbed" UN Under-Secretary-General for Humanitarian Affairs and Emergency Relief Coordinator Stephen O'Brien called for a prompt and "impartial" probe into the attacks.
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"I also call on all parties to protect civilians and stop using explosive weapons or conducting aerial bombardments in civilian-populated places in Yemen. Surely enough is enough," he added.
"This horrendous and heinous attack displayed an utter disregard for human life."
In September 2015, a suspected coalition air strike killed at least 131 civilians at a wedding near the Red Sea city of Mokha. The Saudi-led alliance then also denied any involvement.
And in March this year, Saudi-led air strikes on a market killed at least 119 people, including 106 civilians, of which 24 were children, in the northern rebel-held province of Hajja.
On Saturday, emergency workers pulled out at least 20 charred remains and body parts from the gutted building in southern Sanaa as others scoured the wreckage for survivors.
Some of the wounded had their legs torn off and were being treated on the spot by volunteers, he said.
In a statement to AFP, the Saudi-led coalition said it had no operations at the location and "other causes" for the incident must be considered.
The coalition "has in the past avoided such gatherings and (they) have never been a subject of targeting", it said.
The insurgent-controlled news site sabanews.net said coalition planes hit after hundreds had gathered to mourn the death of the father of rebel interior minister Jalal al-Rowaishan and denounced the "massacre."
The Huthis did not say if Rowaishan was present in the building at the time of the attack, nor did they indicate if other senior figures were attending the funeral.
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Almasirah said Sanaa mayor Abdel Qader Hilal was among those killed.
The attack could further sour already strained US-Saudi ties.
"We are deeply disturbed by reports of today's air strike on a funeral hall in Yemen, which, if confirmed, would continue the troubling series of attacks striking Yemeni civilians," White House National Security Council spokesman Ned Price said in a statement.
"In light of this and other recent incidents, we have initiated an immediate review of our already significantly reduced support to the Saudi-led Coalition and are prepared to adjust our support so as to better align with US principles, values and interests, including achieving an immediate and durable end to Yemen's tragic conflict."
Price stressed that "US security cooperation with Saudi Arabia is not a blank check," and called on all sides to implement an "immediate" ceasefire.
The Iran-backed Huthis swept into Sanaa in September 2014 and advanced across much of Yemen, forcing the internationally recognized government of President Abedrabbo Mansour Hadi to flee.
More than 6,700 people -- most of them civilians -- have been killed in Yemen since the coalition intervened in support of Hadi, according to the United Nations.
Fighting has flared since UN-brokered peace talks between the government and insurgents collapsed in August.
People had come from all over Sanaa to attend the funeral, said Mulatif al-Mojani, who witnessed the latest air strikes.
"A plane fired a missile and minutes later another plane hit" the building where they had gathered, he told AFP.
Another witness, who declined to give his name, angrily described the attack as a "war crime."
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