Clint Eastwood, Sidney Poitier, Helen Mirren, Samuel L. Jackson, Tim Robbins and Forest Whitaker were among the stars who feted Freeman during a ceremony Thursday at Sony Studios, former home of Metro-Goldwyn-Mayer.
The storied Stage 15 - which AFI Chair Sir Howard Stringer said was once graced by Astaire and Judy Garland in film - was transformed into an elegant ballroom, its walls draped in red and gold and dotted with giant framed photos of Freeman, whom Poitier introduced as "a prince of the craft of acting."
In a room filled with hundreds of his colleagues and friends, Freeman listened to star after star share what they admire about him and his work. The 74-year-old Oscar winner sat at the head table near the center of the room, beaming.
Jackson told the actor he was inspired by both Freeman's work and his words.
"In a world of too much cubic zirconium, you are the real thing," he said.
Whitaker called Freeman an "adviser, a beacon, a confidant, a shoulder to lean on, protector, and friend," both in real life and in the characters he has played on film.
Freeman blew Robbins a kiss when "The Shawshank Redemption" star said, "It was an honor being locked up with you, Morgan."
The three-and-a-half-hour celebration included clips of Freeman's legendary films and early performances - including him singing and dancing on TV's "The Electric Company" in the early 1970s - interspersed with recorded segments of Freeman and other actors and filmmakers reflecting on his career.
There were clips of Freeman the soldier, as in 1989's "Glory"; Freeman the detective, as in "Se7en"; Freeman the loyal friend, as in "Driving Miss Daisy"; and Freeman as God, as in "Bruce Almighty" and "Evan Almighty."
"I should be ashamed to say that sooner or later, I knew that someone was going to call on me to play God," Freeman said. "I just had to be sure that when I said OK, that it was a comedy."
There were also musical tributes: Garth Brooks and a chorus performed "Lean on Me," Betty White changed the words from "Hello, Dolly" to "Hello, Morgan," and Rita Moreno performed her own unique song that she said she'd written just for the occasion.
Eastwood presented Freeman with the star-shaped AFI award, calling him "the greatest actor."
"He is the most effortless person to be around and to act," Eastwood said. "I don't know if it's proper to love another man, but this is as close as I'm going to get to it."
Freeman appeared truly humbled.
"This is easy to take but hard to believe. Where I come from in Mississippi, they call this walking in high cotton," he said. "For me, heaven has always been about acting in the movies.
"I'm proud to be an actor, although for this one night, you've made me feel like a star."
Freeman is the 39th recipient of the AFI honor, which recognizes those whose talent helps advance the art of film. Previous honorees include Poitier, Eastwood, Astaire, Elizabeth Taylor, Steven Spielberg and Alfred Hitchcock.
The AFI ceremony will air as a special on TV Land on June 19.