Among those attending the event at Sony Pictures Studios were Jack Nicholson, Warren Beatty, Annette Bening, Matthew McConaughey, Tobey Maguire, Martin Sheen, Oliver Stone, Benicio Del Toro and Kathleen Turner.
The black-tie gala is set to air July 19 on TV Land PRIME, TV Land's prime-time programming block.
After introductions by Sony President and Chief Executive Officer Sir Howard Stringer and AFI President and Chief Executive Officer Bob Gazzale, the show opened with a surprise as a stunt double fell through a fake ceiling, re-enacting Douglas's climactic dinner entrance in his film, "The Game."
Show highlights included moving appearances by the honoree's father, film legend and 1991 AFI honoree Kirk Douglas, and Steve Swankay, an ex-child soldier from Sierra Leone whose education Douglas sponsored; a show-stopping performance of "One" from the musical "A Chorus Line," the film version of which starred Douglas, and a musical performance by Bob Dylan.
Several of Douglas's notable co-stars and friends also paid tribute to him, AFI said.
"I've had so many of my high moments and so many of my fine moments with you," Nicholson told Douglas as he presented him with the AFI award.
Notable deaths of 2014 [PHOTOS]