Barty recovered from 5-1 down in the second set beat Danielle Collins 6-3, 7-6 in the Saturday night final.
Ashleigh Barty has beaten Danielle Collins at the Australian Open to become the first Australian woman to win on home ground in 44 years.
Incredibly, Barty won the title without losing a set over a fortnight of matches in Melbourne.
She recovered from 5-1 down in the second set to beat Danielle Collins 6-3, 7-6 in the final on Saturday night.
Barty is the first Australian women's singles champion since Chris O’Neil in 1978.
She took the first set after saving a break point in the fifth game and then breaking in the next.
Not to be outdone, Collins hit back quickly, making use of her powerful ground strokes and relying on her high-intensity game, breaking Barty's serve in the second and sixth games to take a 5-1 lead.
Collins twice served for the set and was within two points of leveling the match on two occasions, taking her first Grand Slam final to the deciding set.
She led 30-0 in the seventh game of the set, but started to lose momentum when Barty jumped on a second serve and sent a return winner down the line. Another forehand winner just caught the baseline and then Barty got a breakpoint chance with another strong forehand.
She won five of the next six games to force a tiebreaker and then took control by racing to a 4-0 lead.
Barty congratulated Collins and told her she “absolutely” belonged in the Top 10, adding "I know you’ll be fighting for many of these in future."
The 25-year-old has made a remarkable career comeback after taking time off and missing every Grand Slam tournament in 2015 and 2016.
Barty even briefly flirted with the idea of taking up a professional cricket career after crashing out in the first round of three majors in 2014.
She now has Grand Slam singles titles on three surfaces, adding the hard court at Melbourne Park to her win on grass at Wimbledon last year and on clay at the 2019 French Open.
Barty joins Serena Williams as one of only two active players on the women's tour with major titles on all three surfaces.
Evonne Goolagong Cawley, a tennis icon with seven Grand Slam singles titles and a trailblazer for Indigenous athletes from Australia, was a surprise guest to present the champion's trophy to Barty, who is part of a new generation of Indigenous stars.
Barty had only conceded one service game through six matches, against US' Amanda Anisimova in the fourth round.
The 28-year-old Collins was the fourth American to take on Barty in four consecutive rounds. Barty had beaten Anisimova, Jessica Pegula and 2017 US Open runner-up Madison Keys in straight sets.