The 31-year-old Kenyan actress, who has been the red carpet darling this award season, was a favourite to win the trophy for the tortured yet miraculously whimsical role in the movie.
This is Lupita's first Academy Award. Her award was announced by last year's best supporting Oscar winner Christoph Waltz.
Looking stunning in a ice blue gown, Lupita thanked her director McQueen, fellow nominees, her co-stars and the spirti of her character in her emotionally charged speech
She also thanked film's director McQueen for putting her in the position, "It's been the joy of my life," she added.
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Lupita beat actresses Jennifer Lawrence (American Hustle), Julia Roberts (August Osage County), Sally Hawkins (Blue jasmine) and June Squibb (Nebraska) to take home the trophy.
The acclaimed drama, based on the memoirs of Solomon Northup, saw Lupita portraying Patsey, the most favored and yet most brutalized slave on a plantation ruled by a sadistic master (Michael Fassbender).
The actress previously won Screen Actors Guild and Critics' Choice Award for her performance before taking home the coveted golden statuette.
Lupita became the fifth black woman to win the supporting actress Oscar and only sixth woman to win an Oscar.