The country music icon passed away in August, aged 80, following a brief battle with cancer, and Cyrus - her goddaughter - paid a heartfelt tribute to Dolly during her show at her Hollywood Bowl on Friday.
Cyrus recalled watching Parton perform at the same venue.
"If she had it her way, and she was playing a show, I'd be standing right beside her in a matching costume. And so when I was coming to the show at the Bowl to see her, I said, you know, 'I would love a night where I can just experience you. I can just enjoy you like the rest of the world has gotten to.'"
Parton opened the show with The Best of Both Worlds, a track from Cyrus' Hannah Montana TV show.
"All of a sudden, Dolly enters, but I hear The Best of Both Worlds. Yeah, Dolly opened performing Hannah Montana," she told the audience.
"And she goes, like a proud aunt, 'I don't know if y'all know this, but my god daughter is Hannah Montana, and she's actually here tonight, but she's sitting out in her seat," Cyrus said.
"'She didn't want anyone to bug her. She said she just wanted to watch the show,' which defeated the entire purpose of the conversation that we had just had, because absolutely no one was aware that I was at the concert until she drew an obnoxious amount of attention to it," Cyrus said.
"But like so many things Dolly did, I didn't understand at the time."
Cyrus says she still feels a strong connection to Parton.
"Sitting here with you all right now, feeling her all around me, knowing that she's right here beside me, every day, more than she could be when she was here; I feel her more now than ever," she said.
"Knowing that I get to share this story with you all, it makes that night very worth it. This memory is gold to me. Me and Dolly, we are eternal. Nothing in this life could ever tear us apart, and I'm gonna see her again.
":And I can't f***ing wait because I miss her."