Dressed in a gunmetal grey one-shoulder gown, Reading-born Kate, 33, managed to hold back the tears as she accepted her award from a group of past winners including Nicole Kidman and Sophia Loren.
In her acceptance speech, a composed Kate thanked director husband Sam Mendes, 43, and children Mia, 8, and Joe, 5, for loving her just the way she is.
'You just don't think that these dreams that seem so silly and so impossible could ever really come true', she said backstage at the Kodak Theatre in Los Angeles.
Another Brit winner, Danny Boyle, who took the best director Oscar for Slumdog Millionaire, winner of the best picture, said: 'It's a triumph for a little film that became a big one'.
Finally! A triumphant Kate Winslet thanked her family as she won the best actress Oscar for The Reader at the 81st Academy Awards in LA
Winner's joy: The actress embraces her director husband Sam Mendes after winning her Academy Award
Other British wins on the night included The Duchess, starring Keira Knightley, which won an Oscar for best costume design.
Winslet with director husband Sam Mendes
And British director James Marsh and producer Simon Chinn won the Oscar for best documentary for the acclaimed film Man On Wire.
Prime Minister Gordon Brown hailed it as a 'great night' for Britain in Hollywood.
'I would like to congratulate Danny Boyle and all those who worked on Slumdog Millionaire on winning an incredible eight Academy Awards,' he said.
Kate pulled off the expected Sunday night win for her quietly powerful performance in The Reader directed by Billy Elliot helmer Stephen Daldry.
In an unconventional moment, she shouted out to her father Roger and asked him to whistle so she knew where he was. He whistled back from his seat at the Kodak Theatre, waving when he responded.
The five-time nominee said: 'I'd be lying if I haven't made a version of this speech before.
'I think I was probably eight years old and staring into the bathroom mirror and this (Oscar) would be a shampoo bottle. But it's not a shampoo bottle now.
'I feel like an unlikely hero,' she said, 'I was not the privileged kid things like this could happen to.
'My mum won a pickled onion competition in the local pub just before Christmas and the Reading Evening Post sent me a picture of her holding her jar.
'Well, Reading Evening Post, here's your next Winslet picture!'.
Kate, centre, is congratulated by Sophia Loren, left, Nicole Kidman, Shirley MacLaine and last year's winner Marion Cotillard
Hollywood glamour: Kate wore a one-shouldered gunmetal grey gown, and an old-fashioned swept-back hairstyle for the ceremony
Slumdog Millionaire director Danny Boyle hugs Rubiana Ali, who portrayed young Latika backstage
Later she told Sky News she planned to celebrate by 'getting massively drunk'.
It proved sixth time lucky for Kate who was first nominated in 1996 for supporting actress in Sense And Sensibility, then in the leading category two years later for Titanic, and best supporting actress again for Iris in 2002.
Best actress nods followed again in 2005 for Eternal Sunshine Of The Spotless Mind and Little Children in 2007.
Another Oscar loss would have tied Kate with Deborah Kerr and Thelma Ritter as the only actresses to be nominated six times and leave empty-handed.
Meanwhile, British-backed film Slumdog Millionaire was the triumph of the night, winning Academy Awards for best picture, best director for Danny Boyle, best adapted screenplay, best cinematography, best sound mixing, best film editing, best score and best song.
Director Steven Spielberg presented the best picture prize to Slumdog's producer Christian Colson, who called to the stage all the Slumdog children.
Crowded on stage were Dev Patel and Freida Pinto, who played the film's young lovers Jamal and Latika.
With them were the younger versions of their characters: Rubiana Ali (youngest Latika), Azharuddin Mohammed Ismail (youngest Salim), Madhur Mittal (oldest Salim), Ashutosh Lobo Gajiwala (middle Salim), Tanvi Ganesh Lonkar (middle Latika), Tanay Cheda (middle Jamal) and Ayush Mahesh Khedekar (youngest Jamal).
Producer Christian Colson is joined by the cast and crew of Slumdog Millionaire onstage after the film is named Best Picture
Triumphant: Director Boyle celebrates with his young stars Dev Patel (Salim) and Azharuddin Mohammed Ismail (youngest Salim)
But Slumdog almost never happened as the film was headed straight to DVD for release after its US distributors were shut down.
Boyle, left, poses with Rubiana as they arrive at the Governors Ball following the 81st Academy Awards
Art mirrored life for the rags-to-riches tale which almost became a victim of the financial climate when Time Warner Inc. announced it would shut down Warner Independent, which had bought its North American distribution rights.
Freida Pinto with co-star Rubiana Ali whose mother watched her on television in the slums of Mumbai
The film, which cost just $10million (£7million) to make, is now set to cross the $100million (£68million) mark.
Winning an Oscar marks the high point in a directorial career that has seen Danny Boyle go from low-budget British movies to films of international acclaim.
It comes 14 years after he made his debut on the big screen with Shallow Grave.
On the way he has made some of the UK's most memorable films including Trainspotting and 28 Days Later.
Accepting the Oscar for best director, Boyle, 52, jumped up and down excitedly in front of Hollywood's finest. He explained that it was to honour a pledge he made to his children.
'I swore to them that if this miracle would ever happen, I would receive it in the spirit of Tigger from Winnie the Pooh,' he said.
The mother of one of the Slumdog child actors celebrated the film's eight Oscars from her home in an Indian shantytown, where relatives and neighbours had gathered to watch the awards ceremony on television.
'I'm so happy that my daughter has won this award and I could see her on stage with such big stars,' said Muni Qureshi, mother of Rubiana Ali, 8.
Neighbours of actor Azharuddin Mohammed Ismail (Jamal) watch the Academy Awards near his home, in a slum in Bandra, Mumbai, India
Ali, along with other child actors in the film, was flown to Los Angeles for the awards ceremony and she appeared on stage after the film's best motion picture award was announced.
The film has generated controversy in India, where some people find its name, and depiction of poverty, insulting.
But Qureshi, who lives with her daughter and the rest of the family in a ramshackle home with no running water in Mumbai's Garib Nagar slum, defended the film.
'I know that this film has been criticised for showcasing poverty. But it has also meant that a girl from the slums of Mumbai who could not even imagine that she would go abroad has reached the Oscars, so how can that be bad?' she said.
In a moving moment the late Heath Ledger's father Kim accepted his son's Oscar flanked by Heath's mother Sally Bell and sister Kate
Despite its troubled start, the uplifting story about a downtrodden boy and girl falling in love through tough times turned out to be exactly what audiences wanted to see.
The first award of the night went to Spanish actress Penelope Cruz, who won her first Oscar for best supporting actress for her performance as tempestuous artist Maria Elena in Woody Allen's romantic comedy Vicky Cristina Barcelona.
'Has anybody ever fainted here?" she asked as she collected her Oscar. "I think I might be the first one.'
The late Heath Ledger's performance as The Joker in The Dark Knight won him the best supporting actor Oscar, which was accepted by his parents and sister.
Ledger has become the second performer to be awarded an Oscar posthumously.
Peter Finch, who was named best actor for Network in 1976, was the only other posthumous winner of an acting Oscar.
Father Kim, who accepted the award on behalf of Ledger's daughter Matilda said: 'This award would have humbly validated Heath's quiet determination to be accepted by you all here - his peers within an industry he loved.'
Comedian Ben Stiller dons a beard to play Joaquin Phoenix, left, as he and actress Natalie Portman present an award
Sean Penn was a surprise winner for best actor in Milk, beating highly touted Mickey Rourke in comeback film The Wrestler.
But there was disappointment for Brad Pitt's The Curious Case Of Benjamin Button. The actor lost out on the best actor award and it collected just two Oscars for best make-up and art direction.
The show was presented by Australia actor Hugh Jackman, who took part in a stunning dance routine with singer Beyonce.
Disappointment: Mickey Rourke and Brad Pitt - seen here with partner Angelina Jolie - both missed out on a best actor award and Pitt's film The Curious Case Of Benjamin Button won only two of the 13 awards it was nominated for
Host with the most: Actor Hugh Jackman did a dazzling turn as the unusual pick for the job of Oscar host
Jackman performs with Beyonce in a show-stopping musical routine
Razzle dazzle them: Oscar host Hugh Jackman and Beyonce , High School Musical's Zac Efron and Vanessa Hudgens and Mama Mia's Dominic Cooper and Amanda Seyfried pair up to perform a big musical number
Source: Daily Mail Uk.
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