"We go back a long way, Diane and I," the director said of the actress, who won a best actress Oscar for her role in his 1977 film, Annie Hall.
In a monologue that received big laughs from those in attendance, Allen likened Keaton to All About Eve's Eve Harrington, joking that he didn't mean to suggest that she was "ruthlessly ambitious" but that when a young Keaton meant to refer to him as a talented young director, she "instead called me a stepping stone."
“Her beauty is not conventional -- by conventional, I mean pleasing to the eye," he cracked. "She's never succumed to any face work or anything... she prefers to look old."
The 71-year-old actress looked stunning in the iconic black-and-white look she's rocked for decades. See more on the style in the video below.
The AFI Life Achievement Award Gala Tribute Event will air on Thursday at 10 p.m. ET/PT on TNT.