Jackson's daughter Paris, 11, fought back tears to describe him as as "the best father you can ever imagine".
The singer's coffin was placed in front of the stage during the event at the Staples Center in Los Angeles after an earlier private funeral.
Lionel Richie, Stevie Wonder and Mariah Carey paid tribute before the family joined a sombre finale on stage.
Stevie Wonder said: "This is a moment I wished I didn't live to see come. Michael I love you."
The crowd cheered as the golden flower-draped coffin entered the arena to the strains of a choir singing "Hallelujah, hallelujah, we're going to see the King" from the song Soon And Very Soon.
Michael Jackson's brothers wore his trademark single gloves
Mariah Carey opened the show, performing I'll Be There, ending with the words: "We miss you."
Jackson's brother Jermaine took to the stage to perform the song Smile. It was said to be the King of Pop's favourite song, featuring the lyric: "Smile though your hearts are aching."
Others paying tribute included Lionel Richie, Jennifer Hudson, Queen Latifah and Brooke Shields.
Some sang, while others spoke about their memories of the King of Pop and his influence on music and society. Many embraced family members as they left the stage.
The BBC's Matthew Price, who was in the arena, said: "It's had to clearly see the family but the glimpses I'm getting show a family both in mourning, and in celebration of his life.
"There are moments of the intensely personal in this very public event."
Civil rights leader Reverend Al Sharpton gave a fiery speech, telling Jackson's children: "There weren't nothing strange about your daddy."
"It was strange what your daddy had to deal with but he dealt with it." Michael was a personal love of mine, a treasured part of my world, part of the fabric of my life in a way that I can't seem to find words to express Diana Ross "Michael was a personal love of mine, a treasured part of my world, part of the fabric of my life in a way that I can't seem to find words to एक्सप्रेस"
Actress Brooke Shields, who first met Jackson when she was 13, broke down in tears as she took to the stage.
Describing Jackson as "pure", she said: "He was often referred to as the King but the Michael that I knew was always the little prince. Michael saw everything with his heart."
The 17,500 people in the arena cheered as clips of Jackson's life and music were played on big screens.
Messages were read from absent guests including former South African President Nelson Mandela, poet Maya Angelou and singer Diana Ross.
The stage was adorned with flowers and a tribute to Jackson
Reporters' log: Live updates
The message from Ross was read by Smokey Robinson. "I'm trying to find closure," it said.
"I want you to know that even though I am not there at the Staples Center I am there in my heart.
"Michael wanted me to be there for his children and I will be there if they ever need me. I hope today brings closure for all those who loved him."
Other people taking part include Usher and Britain's Got Talent finalist Shaheen Jafargholi, who has played the young Michael Jackson in the musical Thriller - Live.
The stage is adorned with the star's image, alongside a mural carrying the words: "In Loving Memory. Michael Jackson King of Pop - 1958-2009."
Millions of fans around the world are watching on TV.
Roads were closed off and concrete barriers erected outside the Staples Center, where Jackson had been rehearsing a comeback show before his sudden death aged 50 on 25 June.
More than 1.6 million fans applied to attend the memorial event, with 8,750 people chosen at random to receive a pair of tickets.
One person not attending is Jackson's former wife and the mother of two of his children, Debbie Rowe.
"The onslaught of media attention has made it clear her attendance would be an unnecessary distraction to an event that should focus exclusively on Michael's legacy," her lawyer Marta Almli said in a statement.
About 50 cinemas across the US are showing the memorial live. It is also being relayed to big screens across the UK, Australia and Hong Kong.
Family members earlier attended a short funeral service at the Forest Lawn cemetery.
Are you a Michael Jackson fan?
Send us your video tributes to email@example.com or text them to 61124. If you have a large file you can upload here.