(CNN) -- Gwyneth Paltrow and Beyoncé can now claim to be the most beautiful BFFs in the world.
"I honestly thought someone was playing a joke on me," Paltrow told People about her reaction when she first heard she landed the top spot. "I had to reread the e-mail three times. I was like, 'This can't be true, I've developed dyslexia -- I'm not reading this right.' It's a very iconic cover in American culture, so it's just amazing."
For the "Iron Man 3" actress, her beauty is most evident when she's just being herself.
"Around the house, I'm in jeans and a T-shirt. I don't really wear makeup," Paltrow told the magazine, adding that that's how her two kids, Apple and Moses, are used to seeing her. The star's husband, Coldplay's Chris Martin, even teases her about it.
"If I've gotten fully dressed up, he'll be like, 'Oh, wow! You're Gwyneth Paltrow!' Because he's used to seeing me in like baggy shorts and frizzy hair," she said.
But at 40, Paltrow said her definition of what it means to be beautiful has changed.
"I feel my most beautiful when I am truly myself. Meaning, when I accept exactly where I am in time and space, and I'm not judging myself in any way, and I feel that I have the peace that comes with loving yourself and all of your flaws," she told People. "I see so much now how beauty really does, as cliché as it sounds, emanate from within."
The actress credits the Tracy Anderson Method for helping her "look younger and feel strong," but she's more focused on helping her daughter Apple, 8, build a healthy body image.
"When we're home sometimes, she'll put on mascara. And sometimes I'll let her wear something out to dinner -- but just a little dab," Paltrow told People. "Also having a father who adores you the way that he adores her is very good for your body image. The more we can love her and let her be who she is, the more confident she'll feel."
People magazine's Most Beautiful issue, which also includes Kerry Washington, Drew Barrymore, Jennifer Lawrence and Jane Fonda, arrives on newsstands Friday.
CNN's Breeanna Hare contributed to this report.