The gala celebration of the Grammys went on as scheduled on Saturday (February 11) at the same Beverly Hilton Hotel where Houston had died hours earlier.
Davis led a tribute to his good friend Houston to open the party, but his decision to continue with the event was criticised by legendary R&B star Chaka Khan.
Khan said in a television interview this week: "I don't know what could motivate a person to have a party, in a building where the person whose life he had influenced so enormously, and whose life had been affected by her... I don't understand how that party went on."
Osbourne also condemned Davis's pre-Grammy party on Wednesday's edition on The Talk and accused the record executive of being insensitive in the wake of a tragedy.
"I think it was disgraceful that the party went on," Osbourne declared. "I don't want to be in a hotel room when there's someone you admire who's tragically lost their life four floors up."
She continued: "I'm not interested in being in that environment and I think when you grieve someone, you do it privately, you do it with people who understand you. I thought it was so wrong."
Houston's family were also reportedly shocked that the Davis party went on as planned.
Osbourne previously compared the popstar's passing to the deaths of Amy Winehouse and Michael Jackson, who both struggled with addiction like Houston.
"It always takes for them to die before we shower them with praise and adulation. They were addicts and there are many addicts still alive. Don't mock them, just help them," she tweeted earlier this week.
Houston's funeral is to take place on Saturday (February 18) at the New Hope Baptist Church in Newark, NJ. The service will be streamed on the internet and on television.
More Whitney Houston Coverage:
> Whitney Houston 1963-2012: Reactions
> Whitney Houston 1963-2012: Obituary
> Whitney Houston: A life in pictures
> Whitney Houston: Greatest musical achievements - pictures
> What is Whitney Houston's best song? Poll
> Whitney Houston to dominate singles, album charts next week
> Bobby Brown: "I love you, Whitney"
Watch Whitney Houston's 'I Have Nothing' music video below: