The first Briton to win the world road racing championship for 46 years and the first ever to win the Tour de France green jersey for top sprinter, he paid tribute to his teammates and the rise of British cycling.
Cavendish's thrilling dash to victory in Copenhagen in September, set up by the teammates to whom he paid tribute in his acceptance speech, was the latest sign of the sport's pre-eminence.
Cavendish, 26, said the fact he had won in a non-Olympic year proved the extent to which the sport was now appreciated by the public.
"I'm absolutely speechless. A few of my teammates here will say that's a rare thing. Without those guys this wouldn't even be close to possible," said an emotional Cavendish, the pre-show favourite. "I had a group of guys in Copenhagen who rode incredibly and that brought a rainbow jersey back to Britain after almost half a decade, and that's a massive thing."
Olympic organisers hope Cavendish's run of success will continue and he will secure gold in the road race to set the country alight on the opening weekend of the Games in July.
In the wake of British cycling's dominance in the velodrome at the Beijing Olympics in 2008, Sir Chris Hoy was the last cyclist to win the prize. Tom Simpson, the last Briton to win the world road race championship in 1965, was the first.
The build up to the awards was overshadowed by a debate over the lack of any female athletes on the shortlist.
In the wake of the furore, and criticism of the absence of swimmers Keri-Anne Payne and Rebecca Adlington and world Taekwondo champion Sarah Stevenson from the list, the BBC has said it will review the way it is compiled for next year.
Northern Irish golfer Darren Clarke, who won the Open in July, came second in the public vote. Mo Farah, the distance runner who won the 5,000-metre gold at the world athletics championships in South Korea, was third.
England cricket captain Andrew Strauss and batsman Alastair Cook missed out on the individual award but were named as part of the team of the year after their Ashes victory in Australia last winter.
Five-time Olympic gold medallist Sir Steve Redgravewas handed the lifetime achievement award. Princess Anne paid tribute to his achievements on the water, and to his "eloquence and passion" in helping secure the London Games.
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