Politicians and music industry bosses had called on organisers to pull the group after member Liam Óg Ó hAnnaidh, who is known by his stage name Mo Chara, was charged with a terrorism offence last month for allegedly displaying a flag of Lebanese militant group Hezbollah at a concert in November while saying "up Hamas, up Hezbollah".
Ó hAnnaidh denied the charge.
"Glastonbury, I'm a free man," Mo Chara said after appearing on stage.
"The prime minister of your country - not mine - said he didn't want us to play, so f*** Keir Starmer," Mo Chara told the crowd, wearing the keffiyeh scarf associated with Palestinians.
At least 30,000 people, hundreds of them with Palestinian flags, crammed into the West Holts stage in blazing sunshine to watch the trio, causing organisers to close the area.
After opening their set with Better Way to Live, which mixes English and Irish, another of the group's members - Móglaí Bap, otherwise known as Naoise Ó Cairealláin - said Mo Chara would be back in court for a "trumped up terrorism charge".
Mo Chara told the crowd the situation over the lawsuit was stressful but it was minimal compared to what the Palestinians were going through every day.
Later in the set, Mo Chara accused Israel of committing war crimes, saying, "There's no hiding it."
Irwin Kelly, 40, said the trio got the crowd really involved in the set.
"Obviously it had a bit of controversy surrounding it," he said.
"But it's art, it's performance."
The Israeli embassy in the United Kingdom earlier said it was "deeply disturbed by the inflammatory and hateful rhetoric expressed on stage at the Glastonbury Festival".
It did not immediately respond to a request for comment on Kneecap's statements.
Access to the area around the West Holts Stage was closed about 45 minutes before Kneecap's performance after groups of fans arrived to form a sea of Irish and Palestinian flags.
Rap punk duo Bob Vylan performed on the stage before Kneecap and led the crowd in chants of "Free, free Palestine" and "Death, death to the IDF".
Starmer told the Sun newspaper this month it was "not appropriate" for Kneecap to appear at the famed music festival in the southwest of England.
Opposition leader Kemi Badenoch had said the public broadcaster BBC, which livestreams the festival, should not show Kneecap, and 30 music industry bosses asked organisers to pull the band from the line-up, according to a letter leaked by DJ Toddla T, cited by the Guardian newspaper.
In response, more than 100 musicians have signed a public letter in support of the group.
The BBC said on Saturday Kneecap's set would not be live-streamed but said the performance is likely to be made available on-demand later.
Kneecap manager Dan Lambert told Reuters the group had expected calls for the performance to be cancelled.
During the hour-long set, Kneecap thanked organisers Michael and Emily Eavis for not bowing to the pressure.
Kneecap, whose third member has the stage name DJ Próvaí, has said they do not support Hamas or Hezbollah.
Mo Chara said on Friday the group were "playing characters" on stage, and it was up to the audience to interpret their messages.
with PA
11°C