Bilan beat Ukraine's Ani Lorak and Greece's Kalomira with an R&B ballad "Believe" before thousands of flag-waving fans of Europe's most glamorous pop song festival.
The Russian singer was joined on the stage by Hungarian violinist Edvin Marton and famous Russian Olympic skater Yevgeny Plyushchenko, who pirouetted on artificial ice to the tune.
Bilan has won the first-ever title for Russia in the competition, which has recently been dominated by Eastern European countries because of so-called bloc-voting among ex-Soviet republics and former Yugoslav states.
This year's competition was held in Belgrade, Serbia. Serbian songstress Marija Serifovic won last year's title with her ballad "Molitva" or "Prayer."
Bilan's appearance at the finals, which opened late Saturday at the Belgrade Arena hall, was his second in just two years. In 2006, he won second place.
Bilan had been tipped as the favourite going in, along with Ukraine and Sweden.
The Russian won 272 points from viewers from 43 countries who picked the winner by phone calls and text messages.
Ukraine's Lorak was second with 230 points, followed by Greece's Kalomira with 218.
The glitzy event was launched by Serifovic. Other guest stars include Bosnian ethno musician Goran Bregovic and Serbia's and L.A. Lakers' former NBA star, Vlade Divac.
Though criticized by many as a show of kitsch and an extravaganza, the Eurovision Song Contest, or Eurosong, is revered by its many followers. They often travel across the continent to support their favourite singers.
About 15,000 guests are believed to have arrived in Belgrade for the event, crowding the Serbian capital for the first time in years.
Serbia is taking advantage of the opportunity to present itself as part of Europe after years of pariah status in the 1990s under the late strongman Slobodan Milosevic.
Authorities have gone out of their way to throw a perfectly organized party. During the finals, a huge screen was put up in front of the Belgrade City Hall as thousands flocked to watch the show.
After the winner was announced, fireworks lit the Belgrade skies.
The finale included 20 contestants who made it through the two semifinals earlier this week.
In addition, performers from Britain, France, Germany and Spain, who are the biggest sponsors of the event, and Serbia, the host country, went straight into the final without having competed in preliminary rounds.
Serbia was represented by Jelena Tomasevic, who finished sixth.
Source: The Canadian Press