"There's been a lot of joy in this room, including the night of May 22, right up until the terrorist attack.
"We cannot let terrorists win. The victims will never ever be forgotten."
Greater Manchester Mayor Andy Burnham had opened the concert by reciting the 22 names of those killed in the bombing, with thousands of music fans cheering as they were read out.
Tributes: Peter Kay told crowds 'we cannot let terrorists win'
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He said: “Thank you to the city for coming together.
"Thank you for being who you are. We are Manchester, a city united, nothing will ever change us, nothing will ever divide us."
Families who lost loved ones and those injured in the terror attack three months ago were among the crowd at the sold-out gig.
Charlotte Campbell, whose daughter Olivia, 15, was among the victims, said she "had to come back as a show of defiance".
"We have to show we are not scared and we don't want Manchester to be scared. We are proud coming here," she told the Sunday People.