Loreen was awarded 372 points - just 15 fewer than the record-breaking score amassed by Norway's Alexander Rybak in 2009. Every country gave Sweden points, apart from Italy, and Loreen got top marks from 18 countries.
Russia was second with 259 and Serbia third, on 214.
The Swedish winning streak started in 1974 with Abba's Waterloo, followed in 1984 by Herreys, and Carola in 1991. The Swedish champion of 1999, Charlotte Perrelli, tried to make a comeback in 2008, but only came 18th.
Last year's Swedish entry, performed by Eric Saade, came third, raising major hopes for this year's performer, Loreen.
Both Loreen and Eric Saade can trace their families back to Arab countries. Saade's father came from Lebanon, while the parents of Stockholm-born Loreen came from Morocco.
The Eurovision Song Contest is immensely popular in Sweden. Over 4,1 million people (out of Sweden's 9.5 million) watched the Swedish final, Melodifestivalen, where Loreen was voted Sweden's representative.
Foreign Minister Carl Bildt also applauded Loreen's win via Twitter, adding that congratulations were due "in a way also to Sweden as the country of the music of today".