Dressed for the occasion, Shetty wore high heels that made walking uncomfortable, prompting Prince Philip to caution her: "Look, be careful with your heels."
Shetty, visibly enjoying every moment of her newfound fame in Britain following the racism row in reality TV show 'Celebrity Big Brother', also spoke on AIDS. She said too much had been made of the reality show.
In her speech, Shetty recalled that right from her childhood in Mumbai, she was aware that "we have to cope with difference on a daily basis - but unless we do, we have no future".
In her address, the Queen said: "By respecting the difference and promoting understanding, the future will be better one for us all. In today's difficult and sometimes divided world, I believe that it is more important than ever to keep trying to respect and understand each other better," she told the 2,000-strong congregation.
"Let us as individuals actively seek out the views of others, let us make the best use of what our beliefs and history teach us, let us have open minds and hearts, and let us, like the Commonwealth, find our diversity a cause for celebration and a source for strength and unity."
The Queen noted that today's Commonwealth was home to nearly a third of the world's population. "Its almost two billion citizens come from many faiths, races, cultures and traditions," she added.
Commonwealth Day, the second Monday in March, celebrates the voluntary Commonwealth of Nations set up in 1926 and reformed in 1949. The event included speakers from Nigeria, Fiji, Northern Ireland and Jamaica.