The star was found dead in her Los Angeles hotel room on Saturday, the day before the prestigious ceremony.
Host LL Cool J opened the event with a prayer for the singer.
The coroner confirmed that Houston, 48, was found in the bath.
LL Cool J said: “There is no way around this. We’ve had a death in our family.
“The only thing that feels right is to begin with a prayer for a woman who we loved – for our fallen sister, Whitney Houston.”
The audience then gave a standing ovation after watching a clip of her hit I Will Always Love You.
Later, dressed in black and with a simple piano accompaniment, singer Jennifer Hudson gave a moving rendition of the same song, ending with the line: “Whitney, we will always love you.”
Houston won six Grammys during her career.
The reaction to Houston’s death dominated the ceremony, which is the most high-profile event in the US music calendar.
Others paying tribute during the ceremony included:
Bruno Mars, who told the crowd: “Tonight we’re celebrating. Tonight we’re celebrating the beautiful Miss Whitney Houston.”
Stevie Wonder said: “To Whitney up in heaven, we all love you.”
Melanie Fiona, who won best traditional R&B vocal performance and best R&B song, said: “Whitney Houston, I would not be standing up here if it were not for you, thank you so much.”
Before the show, Jimmy Jam, a friend and producer of Houston’s, said it was “a bittersweet occasion”.
“Anytime someone passes away, the thing you do is you gather your family together, tell stories,” he said. “A little bit of mourning, little bit of celebrating – this is our family tonight and we’re going to do it the best that we can do it.”
Earlier on Sunday, the Rev Al Sharpton paid tribute to Houston while preaching at the Second Baptist Church in Los Angeles.
“Yes, she had an outstanding range,” he said. “Yes, she could hit notes no one else could reach. But what made her different was she was born and bred in the bosom of the black church.
LA county coroner Ed Winter: “Foul play is not suspected at this time”
“A lot of artists can hit notes but they don’t hit us. Say words but they have no meaning. Have gifts and talent but no anointing. Something about Whitney that would reach in you and make you feel.”
- Jennifer Hudson Delivers Emotional Whitney Houston Tribute at the Grammys (popsugar.com)
- Whitney Houston’s Grammy Awards Moments [VIDEO] (hellobeautiful.com)
- Jennifer Hudson To Honor Whitney Houston At Grammys (losangeles.cbslocal.com)
- LL Cool J opens 54th Grammy Awards with prayer for the late Whitney Houston (Video) (sugarslam.com)
- Whitney Houston Dies (madnewsuk.com)
- Jennifer Hudson And Chaka Khan To Perform Whitney Houston Tribute At Grammys (perezhilton.com)