Inside Oscars Envelopegate! What Really Went Down After Best Picture Shock: 'He's Got the Wrong Envelope!'

If you thought you lost your mind when it was revealed Moonlight actually won the Oscar for Best Picture and not La La Land, then you can only imagine what went down inside the Dolby Theatre.

There was utter shock and confusion throughout the crowd when the dust settled on what will no doubt go down as the most shocking moment in Oscars history — here’s how it all unfolded.

The La La Land cast was in mid-speech accepting the Best Picture award when someone backstage belted out, “Oh my God, it’s not La La Land, it’s Moonlight!”

As seconds went on, the confusion mounted, and the low-level buzz became full-on chaos backstage. Things like, “Oh my f—— God!” and “He’s got the wrong envelope!” could be heard. The feeling was described by one onlooker as “a mix of chaos and disbelief. Jaws are dropped.”

• Watch the PEOPLE & EW Red Carpet Live Oscars pre-show on Feb. 26 at 5 p.m. ET/2 p.m. PT on the People/Entertainment Weekly Network (PEN). Go to PEOPLE.com/PEN, or download the app on your favorite device. Then watch our Red Carpet Fashion Wrap-Up after the Oscars!

As the drama unfolded, Warren Beatty — who had announced the award with Faye Dunaway — walked off stage clutching the envelope. “Warren Beatty won’t give up the envelope! Security is coming,” one person said.

Someone asked Beatty if he was okay — he walked ahead and held the envelope. Faye Dunaway appeared totally upbeat and went over what happened with a friend and said something about seeing Emma Stone‘s name on the card.

(Though Stone said later that she kept her winning card after receiving her Best Actress prize earlier in the ceremony, there are copies of the cards for each category that could have been mistakenly handed to the presenters.)

One production source was overheard saying, “It was NOT Warren’s fault!”

Ryan Gosling shared a sweet moment with Best Supporting Actor winner Mahershala Ali backstage and the two talked and shook hands.

• Check out PEOPLE’s full 2017 Academy Awards coverage and complete winners list!

RELATED VIDEO: Is an Oscar Really Only Worth $1?!

About five minutes later, host Jimmy Kimmel came off stage and said, “I don’t know what just happened! I should probably find out … for the rest of my life people are going to ask me about this.”

“Well, that was history!” one woman in the crowd was overheard saying.

Over at the Lionsgate party for La La Land, gasps were heard as the stunning turn of events unfolded, leaving many guests in complete shock.

And at the Vanity Fair party, guests were equally shocked. Katie Couric, Amanda Peet and Allison Williams were seen in a group watching it outside, and when La La Land won, cheers erupted. Suddenly, someone could be heard saying, ‘Wait, wait,” with more viewers chiming in: “This is crazy!”

At the Governor’s Ball, Moonlight star Naomie Harris told PEOPLE, “It is really surreal. I went up on stage with this weird expression on my face like, ‘What is happening?’ I don’t know what I’m going to look like on screen. I started shaking. I thought, ‘Is this a prank or something?’ ”

• With reporting by MELODY CHIU, PATRICK GOMEZ, MIA McNIECE, SAMANTHA MILLER, GABRIELLE OLYA and KARA WARNER