The municipal govt wrapped up off piece of the city center and expanded subway operations for the approximated 80,000 fans who loaded the open location outside Seoul City Hall and spilled out into the surrounding streets.
"I did certainly not get right here since I was deserving of it. I'm here due to of all of you. I'm just a fat man with two kids," the singer told the ecstatic, dancing crowd at the show-- streamed live to an international audience via YouTube.
"It's a golden chance to show the world how effectively we Koreans play," Psy shouted.
The video clip to "Gangnam Style", featuring Psy's much-imitated horse-riding dance, went viral after its July launch on YouTube, where it has now notched up more than 350 million views.
Just about overnight, Psy was changed into South Korea's best-known social export, being successful where the manufactured girl and boy bands of the native "K-pop" sensation have failed, by revealing into the US market.
Despite being sung almost entirely in Korean, the song is presently top of the British charts and number two on the US Billboard's Hot 100 chart.
During a hugely excellent US promo tour last month, Psy made a guest presentation at the MTV awards in Los Angeles, taught his trademark dance to Britney Spears, and was given a part role on NBC's "Saturday Night Live".
His horse-riding moves have been copied, parodied and mention in almost every conceivable situation.
Jay Leno's "Tonight Show" produced a mock-up video revealing US presidential candidate Mitt Romney performing the dance at the Republican meeting, when West Indian batsman Chris Gayle has adopted it for his celebrations at the ongoing World Twenty20 cricket competition.
Even Stalinist North Korea jumped on the bandwagon, posting a "Gangnam Style" parody on its official government website that mocks Park Geun-Hye, the conservative front-running candidate in South Korea's presidential election.
The Gangnam of the headline is Seoul's most affluent residential and shops district, lined with luxury boutiques, top-end bars and cafes frequented by celebrities and well-heeled, designer-clad socialites.
The video nudges fun at the district's way of life, with Psy carrying on through a world of speedboats, yoga classes and exclusive clubs.
Psy, whose real name is Park Jae-Sang, is a product of Gangnam, having been born in the neighborhood to rich parents.
A relative veteran after more than a decade on the Korean music scene, Psy had recently built up a dedicated fan base that stuck with him through various ups and downs, involving an early brush with the law for smoking marijuana.
In 2007, he was commanded to offer a second period of mandatory army service after it was exposed he had proceeded with his showbiz interests during his first two-year work.
While some reports in the Western media have suggested Psy's in other countries popularity may be linked to bad Asian stereotyping, the confusing Korean reaction to his triumph has been one of national honor.
Thursday's concert may have peaked with the entire crowd horse dancing to "Gangnam Style", but it kicked off with a mass presentation of the Korean national anthem.
The South Korean government refers to trendy culture as a powerful export force that gives worldwide visibility for a country that still feels overseen compared to neighbors China and Japan.
It has committed massive time and money supporting the so-called Hallyu (Korean Wave) of TV shows and pop music that swept off throughout Asia in the previous several years.
"It absolutely helps in our branding efforts," Lee Bae-Yong, chair of the Presidential Council on Nation Branding said of Psy's global breakthrough.
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