The announcement was made overnight in Florence, a statement from the organisers said today.
Dhir beat five other international designers, with a menswear collection that fused classic western tailoring with traditional techniques, including Ikat (hand-tying and dyeing yarn) and Kasui (traditional hand embroidery).
His designs will now be stocked in leading retailers around the world, including Saks Fifth Avenue (New York), David Jones (Australia), 10 Corso Como (Milan), Isetan Mitsukoshi (Japan), and Boon The Shop (South Korea).
Following the announcement, the designer said, "This is certainly very overwhelming, and everything that I needed right now. I've done what I could in India, and this is the best thing that could happen to me for me to move in a bigger way.
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"I think I'm ready for the world, and I also think the world is ready for me and for this kind of aesthetic. The look is easy and happy, and the world needs that right now."
"My collection explores the trans-seasonal aspects of wool and the alchemic transformation of the fibrous wool into smooth, silk-like yarn, which renders the fabric light, airy, fluid and yet full and supple," Dhir said.
"I'm delighted that Suket Dhir has won one of the world's premier fashion awards, sponsored by Australian wool growers," he said in a statement.
"Suket's designs are stunning and a beautiful showcase of wool. I look forward to seeing his garments in leading fashion retailers around the world, including David Jones in Australia," he said.
For the judging panel, Dhir was a unanimous decision.
"In fashion, I'm always looking for emotion, for the heartbeat, for the feeling that something excites me - it may come from an ancient skill but it seems fresh to me," said Suzy Menkes of Dhir's collection.
More than 70 designers were considered for the prize over the past year, with the finalists representing six global regions -- Munsoo Kwon (Asia), P Johnson (Australia), AGI & SAM (British Isles), Jonathan Christopher (Europe), Suket Dhir (India, Pakistan and the Middle East) and Siki Im (US).