His comments sent a murmur of shock through audience members accustomed to tight censorship of Western pop events.
Minutes into a more than two-hour show, Sir Elton told the audience that the performance was dedicated to Ai's spirit and talent.
Several audience members said the crowd rumbled in recognition of how Mr Ai remains a touchy subject for the Chinese government.
Online media sites were reporting on Sir Elton's two-performance tour in China, but not the remark.
The Chinese government further tightened already heavy scrutiny of live performances after singer Bjork shouted " Tibet, Tibet" at the close of a song called Declare Independence at a Shanghai performance in 2008.