The Madhubala and Dilip Kumar starrer beat off tough competition to bag the coveted top spot, narrowly winning over curry-western 'Sholay' at No 2, as part of the survey conducted by British Asian weekly newspaper 'Eastern Eye'.
"My father's movie 'Mughal-e-Azam' being declared the greatest in the year Indian cinema celebrates its 100th anniversary is a great honour and a moment of immense pride for the entire family," said Akbar Asif, the son of the late filmmaker.
I am sure in 100 years time audiences will still watch 'Mughal-e-Azam', which showed us all that the most impossible dreams can come true," he added.
The iconic film not only smashed box office records when it was first released but was also successfully coloured and re-released in 2004.
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Its plot of a doomed affair between Prince Salim and courtesan Anarkali captured hearts all over the world and in 2006 it became the first Bollywood film to get a release in Pakistan after a gap of 41 years.
"Poetic dialogue, one of the greatest soundtracks ever produced, glorious costumes, lavish sets, a great story and big performances from a stellar cast combine to make this a perfect movie," he added.
The results of the survey were drawn up by combining audience votes through various forms of social media, box office figures, cinematic impact and critical acclaim.
The rest of the top 10 in the '100 Greatest Bollywood Movies List' include ' Sholay' (2), 'Dilwale Dulhania Le Jayenge' (3), 'Mother India' (4), 'Awaara'(5), 'Deewar' (6), '3 Idiots' (7), 'Kabhi Kabhie' (8), 'Andaz' (9) and 'Maine Pyar Kiya' (10).
The lead stars with the most movies in the top 10 are Amitabh Bachchan and Nargis, who feature in three each.
The late Yash Chopra is the filmmaker with the most number of top 10 slots, two as director and one as producer.