The song "Here We Go Again", from Charles' "Genius Loves Company" album, was recognised as record of the year.
Among the other honours won by Charles at the 47th annual Grammy Award show Sunday night were best gospel performance with Gladys Knight for "Heaven Help Us All" and best pop collaboration with vocals with Norah Jones for "Here We Go Again".
Charles, who died June 10 last year of liver disease at age 73, was also honoured for best instrumental arrangement accompanying vocalists for "Over the Rainbow", while the album "Genius Loves Company" was named best pop vocal album, best engineered album, non-classical, and best surround sound album.
He won 12 Grammys during his lifetime and his latest album is his biggest seller ever.
Kanye West, the rapper-producer who had a leading 10 nominations this year, was the winner in the best rap album category for "The College Dropout", after being beaten out by Maroon 5 for best new artist.
Four of the five members of the group are alumni of the exclusive Brentwood School.
West also won as a songwriter for "You Don't Know My Name", the winner as best rhythm and blues song, and "Jesus Walks", the winner for best rap song.
Other winners during the non-televised portion of the awards from Staples Centre here included Los Lonely Boys for best pop performance by a duo or group with vocals for "Heaven", Prince for best male R&B vocal performance for "Call My Name" and Green Day for best rock album for "American Idiot".
Irish rock group U2 won for best rock performance by a duo or group with vocals for "Vertigo", John Mayer for song of the year with "Daughters", Alicia Keys for best R&B album for "The Diary of Alicia Keys" while Maroon 5 was named best new artist, beating out West, considered the category's favourite.
"It was very shocking," said Maroon 5 frontman Adam Levine. "I think everyone in the room expected him to win."
West said: "I love Maroon 5.
"With awards, they try to make it like there's one winner, when we're all winners to the effect that we're here," West said.
"We're winning in life, we're winning with our music because it's reaching so many people. Maroon 5, they're just too good."
Other winners during the non-televised portion included former president Bill Clinton, who won for the best spoken word album for the audio version of his autobiography "My Life" and Britney Spears, winner for best dance recording for "Toxic".
Bono of U2 led a group of artists including Stevie Wonder, Jones, Keys, Velvet Revolver, Tim McGraw and Brian Wilson to perform the Beatles' hit "Across the Universe", which was available to be downloaded for 99 US cents from the iTunes website, with all donations and proceeds benefiting victims of the Dec 26 tsunami in South Asia.
Scott Weiland, lead singer of Velvet Revolver taking the best rock performance Grammy, called the tsunami benefit "truly monumental".
"It was one of those moments when the hair stands up on the back of your neck," Weiland said. "I think John Lennon was probably smiling down on us.
"Unfortunately, it takes these sorts of things for the world to get together to stand up for nations in need. But the artistic community, when it comes down to it, really does stand up when it needs to, and when we need to, and it's a really good thing because we are really a blessed people."