His message came as thousands of people cheered the names of those killed in the attack at a charity concert to reopen the venue.
The names of the 22 murdered in the bombing were read out by Greater Manchester mayor Andy Burnham at the start of the show.
The 14,000 concert-goers clapped and cheered, before Mr Burnham 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.”
Before introducing headliner Noel Gallagher later in the night, Peter Kay told fans: “I’ve played here many times, I’ve
watched a lot of acts here and I’ve seen a lot of happiness and joy in this building and in this room.
“There’s been a lot of joy in this room, including the night of the twenty-second of May, right up until the terrorist attack.
— Mr Paul Pils (@MrPils) September 10, 2017
“We cannot let terrorists win. The victims will never ever be forgotten.”
Families of some of the victims were in the crowd at the concert, and there was tight security with armed police and sniffer dogs on duty.
Backpacks, large bags and even iPads were banned as people filed through metal detectors on their way in to the We Are Manchester event.
Trauma specialists and mental health professionals were also on hand.
The event comes three and a half months after Manchester resident Salman Abedi detonated a bomb in the venue’s foyer as people left an Ariana Grande concert on 22 May.
Poet Tony Walsh also recited his poem This Is The Place before the music began.
He moved some people to tears when he performed the poem at a vigil at Manchester town hall the day after the attack.
Walsh told the arena: “The world is watching, the world is listening,and the world now knows that this is the place. We are musical, we are multicultural, we are Manchester, we are magnificent, and we are back.”
Pixie Lott was the first star on stage, with The Courteeners, Blossoms, Rick Astley, Bugzy Malone, and Nadine Coyle also performing.
But it was former Oasis star Noel Gallagher who was the headliner.
Kaye introduced the singer by ironically announcing he was “all the way from London” – before Gallagher launched into Oasis anthems including Champagne Supernova and Half the World Away.
The climax was, of course, Don’t Look Back In Anger.
The song became the sound of defiance, unity and hope in the days following the attack, after a crowd spontaneously sang it at a vigil.
Thousands at the concert again drew meaning from the anthem, singing together as the chorus rang out around the arena.