The American songstress channelled Hollywood glamour in a flowing cream and sequin gown for her performance at the Winter Whites Gala in aid of Centrepoint, a charity of which the Duke of Cambridge is Patron.
The Prince met 23-year-old Taylor at a champagne reception in the King's Gallery ballroom before he sat down to a private dinner before the concert in the royal gardens.
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"I'm absolutely excited," she said ahead of her performance. "I don't think I've ever played at a palace before so it is really wonderful. It's really wondrous."
Trouble singer Taylor was joined by Jon Bon Jovi and British star James Blunt on the concert bill. Taylor posed for a photo with Bon Jovi's sons Romeo and Jacob at the reception.
A young singer from Centrepoint, who peformed for the Duke and Duchess of Cambridge during their visit to a Centrepoint hostel in 2011, also featured on the lineup.
Singer Eliza Doolittle, Downton Abbey actress Michelle Dockery, Colin Firth and his wife Livia Firth also walked the blue carpet.
At the end of the concert, William was due to give a speech and present Jon Bon Jovi with the Centrepoint Great Britain Youth Inspiration Award for his humanitarian work.
All proceeds will go to the homeless charity Centrepoint which William has been Patron of since 2005.
Diana was a long standing and active supporter of the charity, and became patron herself in 1992.
As children, William and his younger brother Harry made private visits to Centrepoint services with their mother, the late Diana Princess of Wales.