The final moment of the ceremony was full of confusion as Warren Beatty and Faye Dunaway mistakenly announced the name of "La La Land". Apparently, they had the wrong envelope.
The producers of "La La Land" were almost through their acceptance speech when the error was detected and Jordon Horowitz graciously called the team of "Moonlight" to accept the trophy.
"There's been a mistake. 'Moonlight', you guys won. This is not a joke," Horowitz declared.
Host Jimmy Kimmel also called it "unfortunate" while a flustered Beatty clarified that when he opened the envelope and "it said Emma Stone, La La Land. I wasn't trying to be funny."
The small budget "Moonlight", Jenkins' second film, was critically loved for its tender portrayal of a young black man grappling with his sexuality while growing in a rough Miami neighbourhood.
Jenkins and McCraney also won the best adapted screenplay while Mahershala Ali walked away with best supporting actor trophy.
Its director Damien Chazelle, 32, who has been called a Hollywood 'wunderkind' for his visionary style of story-telling, became the youngest director ever to win while film's leading star, Emma Stone took home the best actress trophy.
"I realize at a moment like this is a huge confluence of luck and opportunity," Stone said in her speech.
"I want to thank Damien Chazelle for giving me the opportunity to be part of the project that was so special and once in a life time. I am so grateful to be involved in this film and thank you for your patience," Stone said as she thanked co-star Ryan Gosling and her family.
"Manchester by the Sea" star Casey Affleck, actor Ben Affleck's younger brother, won the best actor trophy for his portrayal of a grief-struck man.
"Man, I wish I had something better and more meaningful to say... I'm just dumbfounded that I am included," said Affleck.
It was a close call for the actor as in the final days, he got a lot of negative press for 2010 sexual harassment allegations and many thought Denzel Washington may triumph over Affleck.
In an eloquent speech, Davis, 51, highlighted the importance of telling diverse stories.
"People ask me all the time, 'What kind of stories do you want to tell, Viola?' And I say, exhume those bodies. Exhume those stories. The stories of the people who dreamed big and never saw those dreams to fruition. People who fell in love and lost," Davis said.
British-Indian Dev Patel lost out in the best supporting
actor category but his "Lion" co-star Sunny Pawar had an adorable moment with Kimmel, who recreated the signature lift from "Lion King" with the child.
"I want to say thank you to President Trump. Remember last year when it seemed like the Oscars were racist? It has been an amazing year for movies. Black people saved NASA and white people saved jazz. That's what you call progress," he said.
Kimmel also asked the audience to give "a totally undeserved round of applause" to Meryl Streep, who was called overrated by Trump after she criticised him at the Golden Globes.
Later in the show, Kimmel trolled Trump by tweeting at him: "U up?" and "Meryl says hi." The messages to @realDonaldTrump were displayed on the big screen on the Dolby stage, to much audience laughter.
The Academy used the best foreign language film Oscar category to hit at Trump's travel ban by giving it to Iranian director Asghar Farhadi for "The Salesman".
Farhadi, a previous Oscar winner for "A Separation", had declined to travel to LA for the ceremony to protest Trump's travel ban against seven Muslim countries, including Iran.
In a written statement that was read out onstage, Farhadi said, "My absence is out of respect for the people of my country, and those of the other six nations who have been disrespected by the inhumane law that bans the entry of immigrants to the US."
Mexican actor Gael Garcia Bernal also criticised the immigration policy, saying, "As Mexican, Latin-American migrant worker and as a human being I am against any kind of wall that wants to separate us."
Best adapted screenplay winners, "Moonlight" director Jenkins and Tarell Alvin McCraney, also reflected on diversity.
"...All you people out there who feel like there's no mirror for you, that your life is not reflected, the Academy has your back, the ACLU has your back, we have your back."
Original screenplay award went to Kenneth Lonergan for "Manchester by the Sea" for his moving portrayal of grief.
"Zootopia", an allegorical story about celebrating equality, won best animated feature.
"La La Land" also won best cinematography and production design.
Mel Gibson's World War II drama "Hacksaw Ridge" won two trophies -- for best film editing and sound mixing.
"Arrival", which had entered the competition with eight nominations, won just one trophy for sound editing.
"The Jungle Book", starring Indian-American Neel Sethi, won an Oscar for visual effects while "Fantastic Beasts and Where to Find Them" bagged best costume design.
The group, however, had to skip the ceremony due to Trump's travel ban.
Live action short and animated short went to "Sing" and "Piper", respectively.
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