The competition on Buckingham Green attracted about 100 people.
The scarecrows were judged by Queenstown Lakes District councillor Lex Perkins and sponsor Melanie Hill of Pesto Restaurant.
Among the 26 scarecrows, standing side-by-side was a Justin Bieber-inspired creation and one which represented All Black hero Richie McCaw.
Aiden Gordon (9), of Lake Hayes, who won the 7-12 category was watched by his proud nana from Wellington as he collected his prizes, which included a $50 restaurant voucher.
His nana, Sue Parker, said she had taught Aiden how to sew and he had used the skills when building his scarecrow, which he finished only a couple of hours before the judging.
"It's just neat to show him how to do things and it's neat to use recycled products."
The scarecrows will be displayed down Arrowtown's main street for the remainder of the 10-day festival.
Today's programme includes a market and fun day, which includes a vintage car display, classic flights aerobatic display, and a street parade at 2pm.
Tomorrow there will be concerts throughout the day and night and a Pint and Pie Festival at 1.30pm.
The Gold, Glitz and Glamour Ball and the Pub to Pub Challenge have sold out.
