Delegates observed a minute's silence in memory of Chavez, the driving force behind the creation of CELAC in 2011 as a forum for the Americas that pointedly excludes the United States and Canada.
"We deeply regret the physical absence of one of the great leaders of our America, the unforgettable Venezuelan President Hugo Chavez," Castro said.
Chavez died of cancer in March 2013.
Castro called him "a fervent and tireless sponsor and fighter for Latin American and Caribbean independence, cooperation, solidarity, integration and union."
Nearly all of the region's leaders are taking part in the summit, including presidents Dilma Rousseff of Brazil, Enrique Pena Nieto of Mexico, Cristina Fernandez de Kirchner of Argentina, and Chavez' successor Nicolas Maduro.
The gathering marked two "firsts" for the communist island.
UN Secretary General Ban Ki-moon was in the Caribbean country for the first time. And the presence of the chief of the Organization of American States (OAS), Jose Miguel Insulza, marked the first visit by an OAS representative to Cuba since it was expelled from the bloc in 1962.
Ban met with the former president Fidel Castro, 87, who resigned in 2008. They discussed international conflicts in Syria, South Sudan, Central African Republic and Democratic Republic of the Congo during the 55-minute meeting, Ban's office said
"I was deeply impressed," Ban said of the former leader's health, adding that he appeared very strong physically.
CELAC, founded in Caracas, held is first summit in Santiago in 2013. Chavez, suffering the late stages of cancer, was absent for health reasons.
Castro criticised the United States for a "long history of intervention in internal affairs, military invasions and bloody coups" in the region.
"We continue to live in a world ruled by an unfair and exclusive international order, in which threats to peace and external interference with the region persist," he said.
Castro called upon CELAC to build an alternative model that better fits the region's own reality.
One of the most controversial points on the agenda, regarding admitting the US territory of Puerto Rico as a full member of CELAC, found no consensus and was rejected.
"Our community will be incomplete as long as Puerto Rico's seat is missing," Castro said.
The Cuban opposition said scores of dissidents had been arrested ahead of the summit to prevent protests that might overshadow the event.
The Cuban Commission for Human Rights and National Reconciliation - an umbrella group for dissident organizations - said 40 people had been arrested and 18 others had received "warnings."
The US State Department criticized the arrests and said Havana should "allow Cuban citizens to express their opinions freely, and to allow them to assemble peacefully in the exercise of that right," a spokeswoman said.
US Ambassador to the UN Samantha Power tweeted a message to the gathered leaders, urging them to meet with ordinary Cuban and civil society groups "to learn what is really happening" in the country and to "support democratic change."
CELAC leaders are expected to sign a final declaration Wednesday with more than 80 points ranging from the fight against poverty to the peaceful resolution of conflicts.