The sustained applause happened during Midnight Mass at Ennis's St Peter and Paul Cathedral on Christmas Eve.
From the altar, in his last Christmas service as Bishop of Killaloe, an emotional Dr Walsh thanked parishioners for their "kindness and support".
Later, mass-goers braved sub-zero temperatures to queue outside the church to personally greet Dr Walsh and wish him a happy Christmas.
Earlier, Dr Walsh told mass-goers the Church had been shamed in recent weeks and that people had been justly angry at the Church's failings.
At the end of the Mass, parish administrator Fr Tom Hogan told the congregation that the other priests and the community had taken Dr Walsh under their wing in recent weeks.
Addressing Dr Walsh, Fr Hogan said: "We want to show the love we have for you. You have shown great leadership, empathy, humanity, sensitivity and warmth."
With that, applause began to ring out across the cathedral. Fr Hogan and Dr Walsh then met in the centre of the altar to embrace.
Dr Walsh has been Bishop of Killaloe since 1995 and is due to hand in his resignation letter to Pope Benedict XVI, as is the practice, when he turns 75 next month. He is expected to remain as bishop until a successor is appointed.
Earlier this month, parishioners in Shannon gave sustained applause to Dr Walsh after parish priest Fr Tom Ryan declared the people's love for him. Addressing Dr Walsh at the end of the Mass, Fr Ryan said: "The Pope told us: 'Young people of Ireland, I love you'; and I would sincerely say with the greatest respect to you, Bishop Willie, we love you, too."
In an interview earlier this year about his impending retirement, Dr Walsh said: "I simply believe it is time for me to go and to have a new voice and a man with new energy. Obviously, one doesn't have the same energy in one's 70s as one has in one's 50s or 60s."
Dr Walsh said that the 15 years had "been a great privilege to serve as bishop".
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