Trained by Charlie Appleby and ridden by Kerrin McEvoy, Cross Counter crossed the line clear of Marmelo in second place and A Prince of Arran in third.
The win also represented another first: the breaking of Godolphin and Sheikh Mohammed bin Rashid Al Maktoum's 30-year drought at the race.
"The Melbourne Cup is much more than just a horse race, it's a 158 year old social and cultural tradition that brings Australia and New Zealand to a standstill", says Racing Board chief executive John Allen.
Sadly, No.2 The Cliffsofmoher was injured early on and failed to finish.
Cross Counter spent a week sidelined after a cut reduced the gelding to box rest and walking duties overcoming the hiccup.
For jockey Kerrin McEvoy, winning a third Melbourne Cup was unbelievable.
The race was marred by the death of one of the entries, The Cliffsofmoher, who pulled up within the first 600m with a fractured right shoulder.
A group of refugee activists have been arrested after they staged a protest at the main entrance to the Melbourne Cup.
Cross Counter's victory was the first time a British-trained horse has won the race at Flemington, this year valued at $7.3m.
Aidan O'Brien's head lad TJ Comerford was seen speaking to stewards more than an hour before the Cup, but a Racing Victoria spokesperson said it was only for clarification over what riding tactics the stable might use in the race.
Cross Counter's victory added another feather to Appleby's cap with the trainer having sent out Masar to win the Derby at Epsom back in June in the blue silks of Godolphin.More news: Security tight as 'El Chapo' Guzman trial set to open in Brooklyn
The $6.2 million race was won by Cross Counter, followed by Marmelo and A Prince of Arran.
Six times Melbourne Cup winning owner Lloyd Williams is still very confident that McDonald will be able to find the right path from the twenty-three gate and still thinks Yucatan will be very hard to beat.
Dr Koukash is very confident his horse Magic Circle will win the Cup and just as determined to celebrate in a way no owner has before.
"We'll formulate a plan in the new year", Appleby said.
He said he had spoken to Sheikh Mohammed, the ruler of Dubai, who was "over the moon" with the result.
UPDATES: THE horse that exited midway through the Melbourne Cup - the Aidan O'Brien-trained The Cliffsofmoher - has been euthanased.
"If I could win it, it's going to be the greatest race on earth".
As for Appleby, who is already contemplating a successful defence of the Melbourne Cup in 12 months time, he was full of praise for McEvoy.
Racing Victoria vets found he was lame in the near foreleg after the race.
"It's the best race in the world", he told the crowd at Federation Square.