The 28-year-old from Newcastle dominated the contest, finishing 39 minutes, 41 seconds ahead of Slovakian KTM team-mate Stefan Svitko.
He finished fourth in the 180km final stage in Argentina to clinch the victory, a 15th Dakar win in a row for Austrian maker KTM.
French Dakar veteran Stephane Peterhansel claimed victory in the car section of the contest for the sixth time since 2004, equalling his tally of six motorcycle wins.
A stunned Price was still coming to terms with his triumph after the race.
“Being the first Australian to win the Dakar is just insane,” Price said.
“I don’t know what to say, I don’t know what to think… I’m in shock, I never would’ve thought I could win this race in my second participation.
“This is incredible for my family, my friends and my fans back in Australia!”
He had a tidy 39-minute cushion over Svitko with Chilean Pablo Quintanilla at 48min in third.
Speaking before his son’s victory, Price’s father John Price said the triumph had been years in the making.
“Toby started racing when he was four years of age, and it has always been his dream to be the best in the world,” he said.
“And he is definitely showing he has got the talent to be the best in the world.”
Mr Price said the Dakar Rally was considered one of the most difficult events in the world.
“Words can’t describe it,” he said.
“It’s such a hard event, and there have been numerous competitors from all over the world, and a lot from Australia who have all tried but, unfortunately, they’ve all fallen short.”
Article sourced from: abc.net.au