Singer Alicia Keys speaks about Whitney Houston before performing at the 2012 Pre-Grammy Gala & Salute to Industry Icons at the Beverly Hilton Hotel in Beverly Hills, California February 11, 2012.[Photo/Agencies]

Music producer Clive Davis's pre-Grammy party is typically one of the most fun-filled highlights of the week leading to the music industry's top awards, but this year's event quickly turned into a tribute for Whitney Houston, who died earlier in the day.

On the red carpet outside Saturday night's event, the recording industry's biggest stars were stunned by news that Houston, among the biggest female recording stars of all time, died that afternoon in the same hotel, the Beverly Hilton.

Inside the gala dinner, the mood among stars ranging from Sean Combs to Tony Bennett was initially somber, but in opening remarks Davis, who had first discovered Houston and became a mentor to the singer, said it was time to celebrate her life.

"Simply put, Whitney would have wanted the music to go on and her family asked that we carry on," Davis said to the audience.

But performances and touching tributes from artists such as rapper Combs, veteran British rock band The Kinks, rising star Wiz Khalifa and R&B singer Alicia Keys turned the mood more joyful. And guests were encouraged to remember Houston for her musical legacy.

"Whitney Houston, simply put, had the greatest voice in the world. She was a gift of God. Hearing her sing was like listening to magic. If it wasn't for Clive Davis, the world may not have known about this miracle voice," Combs told those in attendance.

Veteran crooner Bennett kicked off the evening with a subdued performance of "How Do You Keep The Music Playing," and gave a speech that recalled the tragic deaths of Michael Jackson and Amy Winehouse who, like Houston, had suffered from drug abuse during their lives. He used the opportunity to advocate for the legalization of some drugs, saying it would give users greater medical supervision.

The Kinks came together to sing a collection of their hits including "Waterloo Sunset" with Jackson Brown and "The Days" with Elvis Costello, before livening up the party with their famous 1964 single "You Really Got Me."

Sir Richard Branson was awarded the Grammy organizers' President's Merit Award for his contributions to the music industry as the founder of the Virgin Music record label. The Grammy awards will be held on Sunday night.

"While I'm honored to receive this award tonight, it's obviously about the celebration of an incredible singer and the loss of a friend, daughter, sister and mother," said Branson referring to Houston.

Keys sang a medley of her hits including "Somewhere in a City Like Mine" and "Empire State of Mind," and said she wouldn't be a singer without Houston's influence, while newcomer British pop star Jessie J dedicated an emotional performance of "We Are Who We Are" to the late singer.

Rounding out the night was a tribute to iconic soul singer Diana Ross, who gave a rousing rendition of her hit song "Ain't No Mountain High Enough" with Jamie Foxx.