The musician was presented with the prize by his friend, singer Rod Stewart, who described him as "the second-best rock singer ever".
Sir Elton said he was "flattered" by the award, given to artists who have had a "lasting impact" on UK culture.
He also played several of his hits, including Your Song and Tiny Dancer.
Students from the Royal Academy of Music, where Sir Elton trained, joined him on stage to play Home Again, from his new album Diving Board, while Stewart duetted with his "dear mate" on the closing song, Sad Songs (Say So Much).
The concert was attended by the likes of Liz Hurley and Gary Barlow, while video messages were played from President Clinton, Ringo Starr and tennis legend Billie Jean King, for whom Sir Elton wrote Philadelphia Freedom.
The star, wearing red sequinned shoes, received a standing ovation as he accepted the gold Brits trophy.
Holding it aloft, he remarked: "They've even made it sparkly on the bottom, which you know I love".
He dedicated the award to writing partner Bernie Taupin, "who I wouldn't be here without", as well as the "Women's Institute and you, the fans".
The 66-year-old added: "I can think of a couple of people who might have deserved it more than me."
Pop star Lulu, who was a special guest at the show, told the BBC "he is a one-off, he is totally unique."
"Only the Rolling Stones, the Beatles and Elvis are at the top [with him]. So it's perfectly fitting he should get the first Icon award."
James Blunt, who is signed to the star's management company, described him as "the kindest man I've ever met".
"On a music level, on a friendship level, on a humanitarian level this is an incredibly special person - and that's not including his other great talent, which is he is an incredible songwriter and a formidable performer."
Speaking to Dermot O'Leary on stage during Monday's show at the Palladium, he added: "It's been a hell of a summer. I'm glad to be rid of the appendix - it was a pesky little bugger."
He said he would not curtail his touring schedule as he was "addicted to playing live".
"I've played 92 countries, and I want to play 100," he continued. "That's just the way I'm programmed".
The two-and-a-half-hour concert took the form of a career retrospective, with O'Leary interviewing Sir Elton about his career in between songs.
He discussed growing up in the "secretive" 1950s and how he had been forced to abandon any hope of becoming a classical pianist because his "hands are too small".
The star cringed as footage from his infamously bad-tempered fly on the wall documentary Tantrums and Tiaras was played into the theatre, but he was keen to stress he had put his "little demons" to rest.
"I'm not a diva any more," he said. "I like things a certain way but it's called professionalism, I think."
He proved his point later by making his band re-start the song Mexican Vacation four times.
"It's a new song," he explained, "we're getting excited."
Proceeds from the Icon award show will go to the Brit Trust, Text Santa and the Royal Academy of Music.
The highlights will be shown on ITV on 13 September at 9pm.
This was a show geared to the demands of television rather than a live audience but that yielded some unexpected moments – John messing around on the piano while the make-up man powdered his face, a Cliff Richard gag that will most likely be left on the cutting floor.
Usually when an artist of John’s vintage announces they will play something new we read the news as a grim warning and take appropriate action.
But the songs played from new record The Diving Board provided some of the highlights of the night. ‘Home Again’ was poignant and spare. John had said he was a perfectionist and we glimpsed that when he tried four times to get new song – the bar room bluesy Mexican Vacation right. It was ultimately ditched and replaced by a raucous ‘The Bitch is Back’.
Between numbers the father of two spoke candidly about his successes, as well as a failed suicide attempt and his childhood.
And it was during a discussion about his formative years that the 66-year-old left the auditorium stunned when he remarked: "The 50s was a very sedate era. You could play outside without getting raped."
Sir Elton also recalled a failed suicide attempt, when he swallowed 60 Valium tablets and leapt into a swimming pool, as well as joking about his infamous temper - something he said his long-term partner, David Furnish, had helped him control. The pop star also spoke lovingly about how becoming a father to two young sons was an "enchanting" experience, while being typically self-deprecating about his own abilities.
- MSN Music
Full Set list:
I'm Still Standing (from Too Low For Zero, 1983)
Your Song (from Elton John, 1970)
Philadelphia Freedom (Single, 1975)
Bennie And The Jets (from Goodbye Yellow Brick Road, 1973)
Tiny Dancer (from Madman Across the Water, 1971)
Home Again (from The Diving Board, 2013)
Rocket Man (from Honky Chateau, 1972)
Mexican Vacation (from The Diving Board, 2013)*
*Replaced by The Bitch is Back (from Caribou, 1974)
Sad Songs (Say So Much) with Rod Stewart (from Breaking Hearts, 1984)