The Australian pair duetted on their 1988 smash hit Especially For You to rapturous audience applause.
During a musical interlude, Donovan swept the diminutive pop star - dressed in a short black dress with green leather - off her feet in a heartfelt embrace.
Globally loved for their roles as Scott and Charlene in soap Neighbours, the single sold more than a million copies in the UK alone. "How long have you waited for this for?" Minogue asked, before singing the closing notes.
The stars were joined by 80s and 90s pop stars Rick Astley, Bananarama and Steps among others for the Hit Factory Live - Christmas Cracker at London's O2 arena.
The show celebrated the Stock Aitken Waterman songwriting and production team.
Pete Burns, dressed in a black dress and veil, joined his Dead Or Alive bandmates to play You Spin Me Right Round.
Wearing black dresses, Bananarama performed I Heard A Rumour, I Want You Back and Venus. Rick Astley belted out his hit single Never Gonna Give You Up, which has become an internet sensation in recent years.
The recently reunited Steps sang a selection of their greatest hits, including The BeeGees's Tragedy and One For Sorrow. Other acts included 2 Unlimited, Sonia,- Princess and Pepsi & Shirlie.