Loach, applauded the world over for his politically-inflected social-realist dramas, became the eighth director to win the festival's top prize twice. His last win here was in 2006 for "The Wind that Shakes the Barley".
He is now in the company of Alf Sjoberg, Francis Ford Coppola, Bille August, the Dardenne brothers, Emir Kusturica, Shohei Imamura and Michael Haneke. This was Loach's 13th appearance in the Cannes Competition.
"When there is despair people from the far right take advantage. We must give a message of hope, we must say another world is possible," Loach signed off.
The awards night of the 69th Cannes Film Festival was a triumph for British cinema with the other UK title in the Competition, Andrea Arnold's "American Honey", winning the Jury Prize.
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Romania's Cristian Mungiu, a previous Palme d'Or winner, shared the best director prize with Frenchman Olivier Assayas.
While the latter won for "Personal Shopper", a Kristen Stewart-starrer that divided critics here, Mungiu bagged his prize for "Bacaluareat" ('Graduation').
"Bacaluareat" is a masterful probe into petty corruption fuelled by a respected and well-meaning doctor's desire to see his daughter secure admission in a British university so that she can escape the lack of opportunities in the Romanian town they live in.