Commando Kiwi's The Warlock of Firetop Mountain: Lost Chapters was crowned the best project by Fighting Fantasy creators Ian Livingstone and Steve Jackson.
The third-person adventure, which features an active time battle system based on the book's skill and luck combat elements, fought off strong competition from three other student-led projects.
"I'm just dead-proud of my team. They've worked really hard and this competition has changed our lives forever," said Commando Kiwi's team captain Jonny Robinson.
Ian Livingstone added: "Commando Kiwi really captured the essence of The Warlock of Firetop Mountain with great gameplay and visuals
"It's remarkable what these student teams were able to produce working remotely for such a short period of time using UDK.
"Although only one of the teams has won this amazing prize, the experience students have gained is invaluable and I fully expect to see many of them working in the video games industry."
> Read our Fighting Fantasy Make Something Unreal interview with Epic Games
All four games will released on the App Store through a publishing deal with AppyNation in the coming months, with first week sales to be donated to The Prince's Trust charity.
The contest was run as a collaboration between Infinity Blade and Gears of War developer Epic Games and Train2Game at Birmingham's The Gadget Show Live last week.
It saw leading industry figures such as Peter Molyneux and Cliff Bleszinski provide advice for the competing teams.
View the first screenshots of Fighting Fantasy on iOS below: