Dolly Parton. Credit: James Devaney/WireImage/Getty Images

Country music legend Dolly Parton  said she was "shattered" when she heard Whitney Houston's version of her song, "I Will Always Love You," played at her funeral, but felt the song has "connected" them.

"[It] just shattered me to hear that song played under those conditions," Parton in an interview today with " Nightline." "I thought my heart was gonna stop. It just pierced me like a knife. It's just- I can't explain that feeling, to think that that was so final for her, and that that was my words and my feeling- I would forever be so connected to her."

"I Will Always Love You," which Parton originally wrote in 1972, has long been a chart-topping hit.

It became a No. 1 hit on the country music charts after its release in 1974.  Decades later, actor Kevin Costner brought it to  composer David Foster, who rearranged the song as a pop music ballad for Houston, who recorded it for the 1992 film, "The Bodyguard." The film was a blockbuster, and the song enjoyed 14 weeks at the top of Billboard's Hot 100. It became the anthem of Houston's career.

Parton said she didn't know how Foster had rearranged her song until she heard it on the radio months later while driving in her car.

"All of a sudden I hear this- this a capella sound, I just hear this, 'If I should stay,' and it didn't register, and I thought, 'what is that?'" Parton said. "And just still just kind of- 'That's my song,' but it still didn't register it was Whitney, because it was just this solo voice, and then all of a sudden it went into the 'I will always love you,' and I thought I was gonna wreck. It just overwhelmed me."

The day after Houston's death on Feb. 11, "I Will Always Love You" was No. 1 on Billboard's music charts and was the No. 1 downloaded song on Apple's iTunes.  Houston's 2000 album, "Whitney: The Greatest Hits," which includes the song, became the leading album, knocking Adele's Grammy-winning "21? from the top slot.

Singer Jennifer Hudson's stirring tribute performance at the 2012 Grammys and the TV show "Glee's" rendition of "I Will Always Love You," also helped the song make a resurgence.

That has reportedly meant big bucks for Parton, who still owns writer and publisher rates from sales to the song. According to The Hollywood Reporter, Parton has pocketed $70,000 from sales of  the "I Will Always Love You" single alone.

"I really owe a great debt to Kevin Costner and to Whitney Houston and to David Foster," Parton said. "I really feel like that song belongs to all of us… I thought God was looking out for me, that it was meant to be, because how lucky was I that that got to be such a huge song. "

Parton told "Nightline" she wrote the song in 1972 for her late duet and business partner Porter Wagoner while they were arguing about her leaving his syndicated television show to pursue a solo career.

At the time, Parton was already a successful country music star, with a couple of number-one songs. She later re-recorded "I Will Always Love You" for the 1982 film, "The Best Little Whorehouse in Texas" with Burt Reynolds.

"When Whitney did 'I Will Always Love You,' I mean look what a grand song she made out of that simple, heartfelt, you know, song…it was just amazing," Parton said. "Whitney is the one who took it worldwide and really made it a household word - or song, I should say - so I'll always be thankful to her for that."

Parton's latest project is "An Evening With… Dolly Live," a two-disc DVD and CD set, now available at Cracker Barrel Old Country stores and on their website.

ABC News' Victoria Thompson contributed to this report

Watch the full interview with Dolly Parton on "Nightline" WEDNESDAY, April 4 at 11: 35 p.m. ET/PT