Mr Mundell was there to remember the islands contribution to World War One and the loss of two British troop ships carrying American soldiers to fight alongside the Allies.
The sinking of SS TUSCANIA (5 February 1918) and HMS OTRANTO (6 October 1918) off the islands coast, saw around 700 US servicemen and British crew members lose their lives. Over 200 Islay and Jura men died during World War One.
Mr Mundell joined descendants, locals and dignitaries including HRH The Princess Royal, Scottish Government Minister Fiona Hyslop, and United States Ambassador to the UK, Robert Wood Johnson at the service.
Scottish Secretary David Mundell said:
It is right and fitting that, one hundred years on, we reflect on the terrible loss of these two vessels, with such enormous loss of life, off the coast of Islay.
Many thousands of American and British servicemen lost their lives protecting Europe against fascism, and they have our enormous gratitude. That loss was felt keenly on Islay, where every family in every village lost brothers, fathers and sons in the conflict. We must never forget their service and their sacrifice.
The war service of the people of Islay was never more apparent than on those two days in 1918, when the islanders made huge efforts to help survivors - saving lives and looking after those men like their own.
We all have a duty to tell the stories of those who lived and fought in WW1, to keep the memories of them and their sacrifice alive. It has been particularly moving to hear the personal stories of both American and Scottish descendants of service personnel, and those involved in the rescue effort. I am very honoured to be able to pay tribute to Islay, its people and its histor