Chasing 275 for a historic win, the Indians held their nerves as they rode on Gautam Gambhir's 97 and Mahendra Singh Dhoni's unbeaten 91 to overhaul the target with 10 balls to spare and send the cricket-crazy nation into a frenzy.
The vociferous, jam-packed crowd at the Wankhede stadium erupted in wild celebrations as Dhoni hit the winning six runs to give India their biggest cricketing moment and crown themselves the ODI world champions, in addition to being the number one Test team.
The World Cup title triumph, coming as it did after more than two decades, was doubly special for Sachin Tendulkar since it was the only silverware missing from his collection.
It was also a fitting farewell to coach Gary Kirsten, for whom it was the last day in office as the Indian coach.
It was a momentous Saturday night marked by high emotion and poignant scenes as India, for long the game's financial power, stamped their supremacy on the field as well, eight years after Sourav Ganguly's team had made an abortive attempt to scale the pinnacle.
The players, many of them with tears in their eyes, rushed to the ground to hug each other as Dhoni finished it off in style by hitting a six, as fire crackers lit up the evening sky to mark the moment.
The highlight of the Lankan innings was Mahela Jayawardene's rollicking 103 as Sri Lanka capitalised on the batting powerplay to post a decent 274 for six.
Electing to bat after winning the toss, Jayawardene used his vast experience to good effect and anchored the Lankan innings together.
The islanders, desperate to regain the coveted cup after nearly 15 years, lost wickets at regular intervals against the Indians, who were spurred on by a vociferous jam-packed crowd.
The Indian bowlers were disciplined in the first half of the innings but conceded as many as 63 runs in the batting powerplay to undo all the good work.
Apart from Jayawardene's 88-ball knock, captain Kumar Sangakkara (48) Tillakaratne Dilshan (33) and Nuwan Kulasekara (32) were the other notable performers.
The Indian innings began on a disastrous note as the destructive Virender Sehwag was dismissed in the very second ball of the innings with paceman Lasith Malinga scalping the prized wicket.
Sehwag was hit on the pads by an incoming delivery by Malinga as he went for a flick. Umpire Aleem Dar ruled him out before he asked for review but television replays showed that the ball would have hit the stumps.
Tendulkar, playing in what probably is his last World Cup game, entertained his home crowd with a couple of delightful boundaries while Gambhir also looked for runs at the other end.
The Indians suffered a huge jolt went Malinga struck again by dismissing the champion batsman as he snicked an away-going delivery and captain Sangakkara latched on to a low catch. A hushed silence descended on the Wankhede stadium as he started his walk back to the pavilion.
Gambhir drove Kulasekara for a boundary in the extra cover region to notch up 4000 ODI runs while Virat Kohli also pulled the bowler to the boundary in the same over.
Gambhir was lucky to get a reprieve in spinner Suraj Randiv's first over when Kulasekara dropped him at the long off region.
The third-wicket pair of Gambhir and Kohli put on 83 runs before Dilshan broke the partnership by taking a brilliant acrobatic return catch.
The out-of-form Dhoni came ahead of Yuvraj to keep the left-right combination going and was immediately given two 'lives' by the Lankans -- first Sangakkara messing up a stumping chance off Muralitharan and then Dilshan dropping a return catch as he collided with non-striker Gambhir.
Dhoni, however, made the most of the Sri Lankan lapses to rediscover his form which had deserted him in the mega event.
Dhoni and Gambhir scored at a brisk pace to keep India in the hunt.
The pair stitched 109 runs for the fourth wicket before Gambhir paid the price for a horrendous stroke, just three runs short of what would have been a well-deserved century.
Gambhir made room to cut the ball but missed it completely to see his stumps dislodged.
Earlier, both the Indian new ball bowlers bowled a tidy line and length and did not allow the Sri Lankan openers to get off to a flying start while the fielding was also sharp.
Pace spearhead Zaheer's first three overs were maidens and that put some pressure on the two Lankan openers who were not being able to capitalise on the powerplay overs.
The Lankans could manage just 31 runs in the first ten overs, their lowest in the tournament. That was largely because of Zaheer's excellent first spell of 5-3-6-1.
Yuvraj Singh, who had a dream tournament with both the bat and the ball, was introduced into the attack in the 22nd over but the two experienced batsmen were not really troubled by his left arm spin.
It was Yuvraj who finally broke the 62-run third wicket partnership which was assuming dangerous proportions by dismissing Sangakkara who tried to cut a wide ball outside the off stump but only succeeded in edging the ball to Dhoni behind the stump. His knock of 48 came off 67 balls and contained five boundaries.
Yuvraj was again instrumental in breaking the fourth- wicket partnership by accounting for Samaraweera. Umpire Simon Taufel turned down the leg before appeal but the Indians went for the referral and television replays showed that the ball would have hit the stumps.