The ceremony converted two of the Spanish capital's most iconic landmarks into glittering venues from which to present its 2010 honors.
Tens of thousands of music fans crowded downtown Puerta de Alcala and Caja Magica to hear 14 separate performers, including acts by Jared Leto and Shakira.
Lady Gaga beamed her acceptance speech from Budapest, Hungary, where she was on tour. She interrupted a live act in the Hungarian capital to convey by video link her delight at the crop of awards which just kept on coming and spotlighted her song "Bad Romance" as the year's best.
Best New Act went to KE$HA, while the 16-year-old Justin Bieber won the Best Male Artist award, Paramore the Best Alternative act, and Eminem got the Best Hip Hop award.
The new MTV Global Icon award went to Jon Bon Jovi, who thrilled fans with a live performance of "Shot through the heart" and "You're to blame" at the spectacularly decorated, year-old Caja Magica venue, sometimes used for sports events.
At the center of the Caja Magica hall a brilliantly illuminated hollow cube acted as a focal point for indoor acts while the Puerta de Alcala - once the location of the eastern entrance in the long disappeared city wall - provided an outdoor flavor to the show.
Katy Perry got Best Video for "California Gurls" and raised a cheer when she collected the award wearing an ornate, dark outfit.
Presenter Eva Longoria also regaled viewers with a dazzling array of elegant dresses and at one point had the audience in fits of laughter by saying she had discovered her long-lost Spanish relatives in Madrid. She then introduced four statuesque and muscular young men dressed only in underpants bearing the letters "Longoria" at the back. "That's my family, which I'm going to introduce to the girls backstage," she said.