How to remove deleted songs from iTunes Library

 

Here are the instruction:

1. Create a smart playlist with the criterion “Artist” is not “xxxyyyzzz” (or some other random string that does not occur as artist in your mp3 collection). Then name this smart playlist “all entries”. This way, we get a smart playlist with all database entries, working and broken.
2. Create a static playlist called “working entries”.
3. Open the “all entries” playlist, select all (ctrl-a/option-a) and drag the selection to the “working entries” playlist. iTunes will not copy dead entries, so now we have a list with everything and another with only the working ones. We need to substract them from each other. This is how:
4. Create a smart playlist with the following criteria: “Playlist” is “all entries”, “Playlist” is not “working entries”. Check that all rules apply, not any rule. And dang! We just created a playlist of broken database entries. In this playlist, select all (ctrl-a/cmd-a) and hit shift-delete (alt-backspace on macs). iTunes will ask you if you want to remove the selected items from the iTunes library. Of course you want to!

from this blog.