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Houston, whose hits include "I will Always Love You," was found dead in her room at the Beverly Hilton, hours before a traditional pre-Grammys dinner at the hotel where she was reportedly due to perform.
Musicians, gathered ahead of the Grammys on Sunday evening, lined up to pay tribute to the singer, who sold over 170 million records before descending into a very public battle with substance abuse.
"She was one of the greatest singers I ever heard," said veteran crooner Tony Bennett, on the red carpet at the Beverly Hills hotel, where Houston's body was found in her fourth floor room.
Police confirmed her death in a brief statement outside the hotel, where stars were gathering for the annual pre-Grammys dinner hosted by veteran producer Clive Davis.
"At 3:55 pm, Whitney Houston was pronounced dead at the Beverly Hilton hotel," said Mark Rosen, a police spokesman.
Rosen said police received an emergency call from someone in her entourage and found Houston on the floor of her room as attempts were being made to resuscitate her.
"There were no obvious signs of criminal intent at this time, and it is being investigated by the Beverly Hills police department," the police spokesman added.
The cause of death was not immediately known.
People magazine and the TMZ celebrity website reported that Houston had been due to perform at the Saturday night dinner, but this could not immediately be confirmed.
A mobile crime laboratory and a number of police cars were stationed outside the hotel, while inside guests watched live television coverage about Houston's death in the bar and lobby areas.
Condolences poured in on Twitter from shocked fans and from the famous, as sadness over the news spread through the entertainment world.
"Heartbroken and in tears over the shocking death of my friend ... She will never be forgotten as one of the greatest voices to ever grace the earth," wrote Mariah Carey.
"We have lost another legend. Love and prayers to Whitney's family. She will be missed," said Christina Aguilera, while Rihanna wrote simply: "No words! Just tears #DearWhitney."
Smokey Robinson told CNN: "I will always love her. She is one of the greatest voices in the history of music."
Grammys organizers the Recording Academy are scrambling to include some kind of tribute to Houston in Sunday's show at the Staples Center in Los Angeles, according to CNN.
The tribute could involve singer Jennifer Hudson, it added, while Grammys producer Ken Ehrlich told the broadcaster: "Knowing Whitney as I did she knew the importance of thrilling an audience, and that's what we still plan to do."
With a ferociously powerful voice and a dazzling range, Houston achieved stardom as a pop-soul singer known as "The Voice" and the "Queen of Pop." She also appeared in hit movies like "Waiting to Exhale" and "The Bodyguard."
From a musical family that included mother Cissy Houston, a gospel star, and Dionne Warwick, her cousin, Whitney Houston started out as a teen model and then made a dazzling segue to music.
Her hits included "How Will I Know," "Saving all My Love for You," and "I Will Always Love You."
Houston's trove of six Grammy awards included one for record of the year -- for a soaring cover of Dolly Parton's "I Will Always Love You," and another for album of the year for "The Bodyguard."
Houston, who grew up in New Jersey, was also a supporter of the anti-apartheid movement and South Africa's Nelson Mandela, on whose behalf she campaigned during his imprisonment.
She struggled with substance abuse, which took a toll on her health and career.
Houston has sold more than 170 million records worldwide but suffered a major career setback after admitting drug use during an abusive relationship with ex-husband Bobby Brown.
Brown was one of the hottest rhythm and blues singers in the late 1980s and early 90s, but became better known as the husband of Houston and for his frequent brushes with drugs and the law.
The pair, who were divorced in 2007, starred in a television reality series, "Being Bobby Brown," that featured their marriage, warts and all. They have a daughter Bobbi Kristina.
Brown was detained in Atlanta in 1993 for lewd conduct and for brawling in 1995. He was arrested for drunk driving in 1996 and for alleged battery of Houston in late 2003.