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The diva's self-titled effort and Smith's acclaimed debut set are nominated alongside Ed Sheeran's 'X', Pharrell's 'G I R L' and Beck's 'Morning Phase' in the coveted category.
The announcement will run all day, revealing Sia, Iggy Azalea, Meghan Trainor, Ed Sheeran, Miley Cyrus, Beyonce Knowles, and U2 among the nominees for the 57th annual Grammy Awards.
The British singer, who wins Best New Musician (Male) at the awards show, joins other winners including Betty Who and A Great Big World.
Latin superstar Enrique Iglesias is also an AMA winner as he takes home Favorite Male - Latin award during the annual event currently airing on ABC from Los Angeles' Nokia Theater.
Also announced as an AMA performer is Garth Brooks, who will sing a track off his new album from a stop on his ongoing tour.
The British singer is up for four awards including Favorite Male Artist, Favorite Breakout Artist and Favorite Album for his debut effort 'In the Lonely Hour'.
During the show at Manchester's Albert Hall, fans in the audience go wild as Sheeran walks onto the stage and joins Smith for a surprise duet of the song.
Beyonce Knowles, Jessie J, and Idris Elba also take home an award each at the 'Music of Black Origin' event.
The 'American Idol' alum plays the hit song, which is currently at No. 9 on Billboard 200, at her first solo concert since giving birth to her first child, River Rose.
The 16-date trek will open on January 9 in Atlanta and include stops in New York, Detroit, Montreal and others before being wrapped up in Vancouver on February 4.
The 'Stay With Me' hitmaker takes fans behind the stage of his shows in the 4-minute clip which was released on September 29.
The doo-wop track will be included on the singer's new album, 'The London Session', that she'll release later this summer.
Smith, who previously worked with Blige for a new version of his 'Stay With Me', wrote some tracks for the album, including a doo-wop track called 'Therapy' that he co-wrote with Jimmy Napes.
The British singer will make his U.S. awards show performance debut at the ceremony that's set to take place at the Forum in Inglewood, California, on Sunday night, August 24.
Although the reports turn out to be false, the British singer hints he will record a song for the next film if he's asked to.