Despite temperatures hovering around minus-10 degrees, more than three-quarters of eligible voters turned out to cast a ballot.
In a nail-biting count, the conservative Park Geun-hye emerged with 51.6 per cent of the vote, pipping her liberal rival Moon Jae-in.
Both candidates fought the election on the economy, vowing to tackle unemployment and the rising cost of living, and rein in the power of South Korea's giant family-run conglomerates.
"I will be a president who fulfils in every way the promises I made to the people," she said.
However she had been far more cautious than Mr Moon about the need to rein in the power of the giant family-run conglomerates, or "chaebol", that dominate the national economy.
South Korea's first female president has also promised to re-engage with North Korea, proposing a summit with the new young leader in Pyongyang, Kim Jong-un.
She's also warned the North that she will not tolerate more provocations from across the border.
To some extent Wednesday's election was seen as a referendum on the legacy of Ms Park's father, Park Chung-Hee.
More than three decades after he was assassinated, Mr Park remains one of modern Korea's most polarising figures - admired for dragging the country out of poverty and reviled for his ruthless suppression of dissent during 18 years of military rule.
He was shot dead by his spy chief in 1979.
Ms Park's mother had been killed five years earlier by a pro-North Korea gunman aiming for her father.
In an effort at reconciliation, Ms Park publicly acknowledged the excesses of her father's regime during her campaign and apologised to the families of its victims.
"I believe that it is an unchanging value of democracy that ends cannot justify the means in politics," she said.
It was a bitter defeat for Mr Moon, the son of North Korean refugees and a former human rights lawyer who was once jailed for protesting against Park Chung-Hee's rule.
"I feel so sorry and guilty that I have failed to accomplish my historic mission to open a new era of politics," he said.
"I humbly accept the outcome of the election."
Park never married and has no children -- a fact that makes her popular with voters tired of corruption scandals surrounding their first families.
A female president will be a huge change for a country that the World Economic Forum recently ranked 108th out of 135 countries in terms of gender equality -- one place below the United Arab Emirates and just above Kuwait.
"I can't even describe how happy I am right now. I feel like crying," said Cha In-Hong, a 57-year-old office worker.
"Park Geun-Hye has married our nation. Now she will go on her honeymoon to the Blue House to begin governing," Cha said.
Ms Park's presidential inauguration will be held on February 25.
Yonhei University's Professor Lee Jung Hoon says Ms Park will bring 15 years of valuable political experience to the job of President.
"She knows what it takes to be Presidential and therefore I don't think that experience is a question mark here," he told Radio Australia's Connect Asia.
"I believe a lot of the women voters felt that, you know, its time for Korea to have a woman leader and that she could bring about greater equality and rights for the women in Korea.
"I think she's going to make a lot of efforts to unify the country."