The Danish monarch, who turns 70 on Friday, was joined at the Christiansborg Palace dinner by her husband Prince Henrik, as well as her sons and daughters-in-law.
Also present was her younger sister Princess Benedikte and her German husband, Prince Richard of Sayn-Wittgenstein-Berleburg.
The queen chose a glorious cerise gown for the occasion, where she delivered a heartfelt speech in front of the 375 assembled special guests, who included Danish prime minister Lars Lokke Rasmussen and other dignitaries.
"Tonight I have the opportunity to send greetings and give thanks to the whole country for everything I have received over so many years in the form of kindness and warm attention from everywhere," she said.
Accompanied by Crown Prince Frederik, Crown Princess Mary looked chic in a flowing short-sleeved red number and diamond tiara.
Meanwhile, Prince Joachim's French wife Princess Marie was the picture of elegance in a long-sleeved white gown and intricate jewelled headdress.
After the dinner, which included a starter of lobster jelly with seafood, followed by roast fillet of beef for mains, and cake alongside plums marinated in cognac for dessert, Danish TV station TV2 treated the monarch and her guests to a special birthday concert.
The line-up included music, comedy and magic from Danish stars, as well as Cliff Richard, who himself turns 70 later this year, singing his hit song Congratulations.
The banquet is just the start of several days of celebrations for Queen Margrethe over the next few days.
On Thursday evening there will be a gala performance in Copenhagen's Royal Theatre featuring music and dance recitals.
Then on Friday morning, the queen will greet well-wishers from the balcony of the Amalienborg Palace, before taking a carriage ride through the streets of Copenhagen to a lunch at City Hall.
That evening, there will be another dinner and dance at Fredensborg Palace, the Danish royal family's spring and autumn residence.