Alicia Keys had a lot to smile about on her 29th birthday Jan. 25: an engagement ring from her producer beau, Swizz Beatz!

A pal tells UsMagazine.com that Beatz, 31 (who is currently divorcing wife Mashonda), proposed with a 7-carat sparkler right before her big day; the happy couple were photographed strolling on a Hawaii beach the day of the proposal, Jan. 24.

Keys’ rep denies she is engaged, but another friend reveals, “They are currently in Hawaii celebrating the engagement and her birthday. She feels blessed.”

Adds the pal: “She is thrilled. She is with the man who has inspired so much of her music and her new album [The Element of Freedom].”