The win came after a massive online push from residents and supporters that lifted the city above its five competitors to the top of the competition.
Seconds after the annoucement, Mayor Dave Cull was at the podium in Wellington accepting the prize he said would have a real effect on Dunedin residents.
''This will affect their lives, it will affect their children's job prospects, it will affect their educational possibilities, it will affect their medical services, it will affect their retail, it will affect every aspect of our lives.
''This will enhance the possibilities for our whole community.''
Mr Cull's enthusiasm was backed up by city tertiary and business leaders last night.
The competition was launched in October last year, with 50 towns from around New Zealand competing to become the country's first Gigatown.
Gisborne, Dunedin, Timaru, Nelson and Wanaka were announced as finalists in September.
Dunedin was named the winner by Communications Minister Amy Adams last night.
Mr Cull told the Otago Daily Times the feeling was ''as much as anything relief that all that work by all those volunteers and all of the community getting together was being rewarded''.
The city had asked ''a huge amount of our community in terms of coming along on the ride''.
That happened, despite criticism and comment from some the competition was not worth it, or was ''a con''.
Mr Cull said the city would set up a governance, or working group, to decide what to do now the city had won.
One issue was making sure Dunedin did not end up with ''a digital divide'' with only half having access to ''this incredible superhighway''.
''We're going to make damn sure that this is something to be shared by the whole community.''
Animation Research chief executive Ian Taylor said last night the win was ''just the start''.
Dunedin would be the first Gigatown in New Zealand and Australia, and ''now we have to really put our nose to the grindstone and make it work''.
Both Mr Taylor and Mr Cull were keen to connect with other cities involved in the Gigatown finals competition.
Asked to give a practical benefit example, Mr Taylor said: ''The power of the 'gig' is the power of collaboration.
''The provinces are on the arse-end of things at the moment.
''Dunedin now has the opportunity to show government, to show everybody, you ignore us at your peril.
''We have got this, now we're going to collaborate with other provinces, we are going to collaborate, and we are going to look after our own destiny if you don't look after us.''
University of Otago vice-chancellor Prof Harlene Hayne said she was ''absolutely thrilled for Dunedin''.
''University staff, students, and alumni pulled together with the rest of the ... community. This is a fabulous example of how town and gown can work together.''
Prof Hayne said Dunedin had the capacity to use the opportunity to its best advantage.
''Faster broadband speed will transform the way we conduct research, access information, and connect with our peers in the global community.''
