The Olympic gymnast and his professional partner Flavia Cacace triumphed after performing a showdance and a reprise of their earlier salsa and charleston routines.
When asked on how Strictly compared to Olympic competition, Smith joked: "They're both very different, but I can finally say I've won something in the year 2012!"
At London 2012, Smith had won a bronze medal as part of the men's artistic team all-around event, and the silver medal in the men's pommel horse final.
The 23-year-old praised partner Cacace, saying: "She's the nicest person I've ever met... she's so patient!" He also expressed an interest in continuing dancing after his appearance on the show.
Cacace said the pair "couldn't believe" their win, before telling Smith: "Thank you for sharing your amazing talent and skill and ability with me."
The bookies' favourite beat Kimberly Walsh and Denise Van Outen, who were neck and neck with Smith in the judges' voting.
At the end of the final Van Outen and James Jordan had 119 points, while Walsh and her partner Pasha Kovalev and Smith and Cacace were tied on 118 points each.
Walsh said of the experience: "It has been absolutely amazing, I've loved every minute of it... I'm so so happy for Louis," while Van Outen said she would miss partner Jordan, saying he was "amazing" and "made her laugh every day".
Dani Harmer was announced as Strictly Come Dancing's fourth-placed celebrity at the beginning of tonight's results show (December 22).
Watch Louis Smith and Flavia Cacace's showdance below:
Photo gallery - Strictly Come Dancing 2012 final: