In a heartfelt speech, he said his mother was only 25 and still finding her way in public life when she chose to shine a spotlight on Aids.
"She knew that the misunderstanding of this relatively new disease was creating a dangerous situation when mixed with homophobia. People were being ostracised from their communities - and sometimes from their families - simply for being ill."
"When she shook the hand of a 32-year-old man with HIV in front of the cameras, she knew exactly what she was doing," he said.
"She was using her position as Princess of Wales - the most famous woman in the world - to challenge everyone to educate themselves; to find their compassion; and to reach out to those who need help instead of pushing them away."
The ceremony, which was hosted by Tom Daley, recognises the "inspiring stories and outstanding achievements" of key figures in the LGBT community.
Guests included Kylie Minogue, who received a "legend" award, Matt Lucas, Sam Smith, Chris Robshaw, Beverly Knight and Little Mix's Jade Thirlwall.
Among the stand-out red carpet looks was X Factor singer Louisa Johnson, who turned heads in a plunging tangerine gown with a daring thigh-high slit.
As he walked on the stage Harry, whose appearance at the ceremony was a surprise to most of the audience, immediately won them over with his flirty quip.
He went on: "I often wonder about what she would be doing to continue the fight against HIV and Aids if she were still with us today.
"I believe she would be telling everyone across society - not just those most at risk - that with effective treatment being free and available in the UK, that we must all embrace regular testing - both for our own sake and for those that we love." A video of the speech was shared on the Attitude Magazine Twitter account.
The appearance reflects Harry's desire to carry on his mother's work, and his commitment to campaigning on HIV/Aids. He has publicly taken an HIV test to emphasise the importance of testing, and set up a charity - Sentebale - to help children in Lesotho affected by the condition.
The award, which was marked by Diana featuring as one of six limited edition winners' covers, was introduced by two former health workers who both met Diana.
Ian Walker was a senior occupational therapist at the London Lighthouse, the former Aids centre in west London which Diana often used to visit, and Julian La Bastide was a nurse at the Mildmay Hospital.
Walker, who met Diana several times between 1993 and 1997, said: "She filled the room and she gave off light. Everyone was immediately put at ease, and just the fact that she would come in, talk to someone, hold their hand, that would mean that maybe the next day they died happy because Diana had spoken to them."
Recalling the pivotal moment when she shook hands with an Aids patient, he added: "It seemed to break down a million barriers overnight with that one simple act. This was a time when people were terrified to touch people with HIV, people would glove, mask and gown up in regular hospitals. People were rejected by their families, people would feel really uncomfortable when they saw you walking around. She held that guy's hand and overnight this dispelled a lot of the stigma."
La Bastide, a nurse at the Mildmay Mission for 17 years, recalled the effect of Diana's work. He said: "My patients and people I worked with felt that they were important, that someone was taking their cause - their fight - to another level. Diana wasn't making that distinction of 'these people are more important or less important'. It was, 'you are all important'. And she knew that every time she did an announced visit with the cameras there, that would go mainstream."
A Kensington Palace spokesman said: "Prince Harry was keen to do this as he has continued his mother's work on HIV/Aids and the awards are in support of the Elton John AIDS Foundation who he has worked closely with."
