The pope, who on Tuesday was tired after starting his trip under a blazing sun, looked relaxed against a sparkling backdrop of rolling waves as he told the hushed crowd that Vaz was an example of religious tolerance relevant to Sri Lanka today.
"Saint Joseph shows us the importance of transcending religious divisions in the service of peace," he said in his homily, delivered to a nation recovering from a long war between mainly Buddhist Sinhalese and Hindu Tamils.
Vaz, who was captured as a suspected spy after he crept into the tropical island in disguise, was born in 1651 in Goa, India, then a Portuguese colony.
He travelled south at the age of 36, dressed as a beggar, to a country then divided into kingdoms and European colonies after hearing about the persecution of Catholics by the Dutch. He worked for years under the protection of a Buddhist king.
On Monday, Francis called on the Buddhist-majority country to uncover the truth about its bloody civil war that ended in 2009 with the army's crushing defeat of Tamil rebels and the deaths of tens of thousands of civilians.
Francis' visit, the first by a pope in 20 years, has added to the sense that a new chapter is opening on the island, which voted the wartime leadership out of power last week.
Francis, speaking slowly in English, said Christians should follow the example of Vaz to build peace, justice and reconciliation. Catholics make up about 7 percent of Sri Lanka's 20 million population, while 10 times as many people follow Buddhism.
"We really need people like him to ensure peace and harmony in this country," a woman who identified herself as Fathima, wearing traditional Muslim dress, said of the pope.
About 10 percent of the population follow Islam. They faced rising attacks from Buddhist extremists under the government of former President Mahinda Rajapaka.
Earlier, Francis stepped out of his popemobile to greet people, placing his hands on childrens' heads.
He was due to go by helicopter to a shrine in the north that was shelled in the war, then move on to the Philippines on Thursday as part of a week-long tour, his second trip to Asia, to shore up the Church's presence in developing nations.
BENDING THE RULES
The canonisation is an example of Francis's no-nonsense approach to creating saints to meet the demands of the flock for new holy figures, particular in parts of the world where the Church is still growing.
He bent Church rules and dispensed with a regulation that normally requires a second miracle to be attributed to a candidate for sainthood. Vaz was beatified by Pope John Paul during a visit to Sri Lanka in 1995.
Vaz spent five years secretly preaching in the lush lowlands before making his way to the fortress-like Kingdom of Kandy in the hill district's rainforests, where he was captured and accused of espionage for Portugal under the guise of religion.
He was detained for nearly a year until he convinced the powerful king that he was a priest, according to texts from the 17th century cited on a website run by Sri Lankan Catholics (www.josephnaikvaz.org).
Vaz remained in Kandy until his death in 1711, by which time the Church says he had almost single-handedly re-established Catholicism in Sri Lanka.
Some nationalists highlight the violence of the Church's early years and say it led to the destruction of many Buddhist temples.
"The Church is legally responsible," said Susantha Goonatilake, president of the Royal Asiatic Society of Sri Lanka, who says Francis should offer an apology.