An emotional Lewis Hamilton put his Mercedes on pole for the Monaco Grand Prix and said: "This is for you, Niki."
Hamilton will start as the overwhelming favourite to win on Monte Carlo's tight streets on Sunday after he edged out team-mate Valtteri Bottas by 0.086 seconds with his final lap.
The exuberant world champion yelled over the radio in delight, before leaping out of his silver machine and jumping on to the catch fencing at Rascasse to celebrate with fans.
Hamilton danced his way around the principality with the painted red halo, in tribute to Lauda, standing out on his silver car.
Lauda has been absent from the F1 scene since he underwent a double lung transplant last August.
"I was in touch with Niki a lot over the past eight months," added Hamilton. "We would send videos back and forth.
"Some days he looked good and was really perky. But there were other days where you could see he had lost a lot of weight – it was tough to see from afar."
Hamilton then reflected on the phone call he received from the outspoken Austrian – urging him to turn his back on McLaren and move to Mercedes.
The British driver has won four of his five world championships, and 54 of his 75 career victories with the Silver Arrows. In contrast, McLaren have not won a single race since the British star left.
"I was down by the pool where I live here in Monaco, and I remember getting a call from Niki," said Hamilton.
"We had never really spoken before, but he said to me, 'you should come to Mercedes, this is where you should be'.
"Over the years he became my partner in crime, involved in negotiations, pushing for improvements on the car. He was such a racer. He would be back at the team factory giving them a***holes.
"He was a part of the process of changing my life. If I didn't receive the call, I would be a one-time world champion, probably with 21 wins. Now, I sit here as a five-time world champion and I owe him a lot for that.
"We all love him, miss him and it is hard to think I will never see him again, and have another conversation with him. He will live long in all of our memories."
Mercedes have had it all their own way this year, starting the campaign with a record five one-two finishes. The Silver Arrows are on course to make it six in six after another dominant performance. It would be the perfect tribute.
Red Bull driver Max Verstappen lines up third ahead of Ferrari's Sebastian Vettel. His team-mate Charles Leclerc is set to start 16th after a woeful Ferrari miscalculation eliminated the Monegasque from the opening phase of qualifying.