During her hour-long set, Houston "both looked and sounded amazing," a guest tells PEOPLE. "She was fantastic."
Houston, who is working on a new album with her old friend Clive Davis, sang hits, including, "I Wanna Dance with Somebody," "I Will Always Love You," "The Greatest Love of All," and "Saving All My Love for You."
"It was like her greatest hits, only live," adds the guest.
Houston, who has had a tumultuous custody battle with her ex-husband Bobby Brown, brought daughter Bobbi Kristina, 15, on stage and introduced her as "the love of my life." The pair performed a duet of "My Love Is Your Love."
Among the evening's guests was singer Kelly Rowland, who said before the show began, "I'm jumping through my skin to see [Whitney] again."
As for Houston's troubled past, the Destiny's Child singer said, "People should not judge her. She's done more than prove herself."