It was the second time a movie by sibling filmmakers Jean-Pierre and Luc Dardenne won the prestigious Palme d'Or. Their teen drama "Rosetta" took the main Cannes prize six years ago.
The award was presented by Hilary Swank and Morgan Freeman, who won Academy Awards in February for Clint Eastwood's boxing saga "Million Dollar Baby."
Receiving the second-place grand prize was U.S. director Jim Jarmusch's "Broken Flowers," a droll drama starring Bill Murray as an aging Don Juan in pursuit of the son he never knew he had.
Tommy Lee Jones was honored as best actor for "The Three Burials of Melquiades Estrada," his feature-film directing debut in which he plays a Texas ranch hand who forces his best friend's killer (Barry Pepper) to dig up the body and haul it for reburial in Mexico. The film also won the screenplay award for Mexican writer Guillermo Arriaga.
Hanna Laslo earned the best-actress prize for her role as a gabby cabdriver in Israeli director Amos Gitai's "Free Zone," a road-trip tale through the Middle East.
Austrian filmmaker Michael Haneke received the directing award for "Hidden," his cryptic thriller about a couple menaced by a video stalker.
The third-place jury prize was given to Chinese director Wang Xiaoshuai's "Shanghai Dreams," a love story set among workers who dutifully obeyed the government's call to relocate to factories in a remote new territory in the 1960s.
The award for best film by a first-time director was shared by U.S. filmmaker Miranda July for "Me and You and Everyone We Know" and Vimukthi Jayasundara of Sri Lanka for "The Forsaken Land."
On Friday, Romanian director Cristi Puiu's "The Death of Mr. Lazarescu," a tale of a lonely widower living with three cats, won the top prize in a secondary Cannes competition called "Un Certain Regard." July's "Me and You and Everyone We Know," took main honors in a third Cannes category overseen by critics.
Awards night was a quieter affair than last year, when firebrand Michael Moore took the top prize, the Palme d'Or, for "Fahrenheit 9/11," his scathing critique of President Bush over the Sept. 11 attacks and the Iraq war.
The lineup of 21 films in the main competition did not produce any universally loathed turkeys like Vincent Gallo's "The Brown Bunny" two years ago, but it also did not offer any odds-on favorites that had audiences raving.
The consensus among Cannes crowds was that the main competition produced a solid but unremarkable crop of films.
The main attractions during the 12-day festival were two films that played outside the competition. "Star Wars: Episode III — Revenge of the Sith" was the festival's centerpiece, with the sci-fi franchise's creator George Lucas and stars Hayden Christensen, Natalie Portman and Samuel L. Jackson parading down a red carpet swarming with actors in white storm trooper costumes and a black Darth Vader outfit.
Woody Allen's "Match Point," a comic drama starring Scarlett Johansson, Jonathan Rhys Meyers and Emily Mortimer, proved to be his most crowd-pleasing film in years. Some critics said it would have been a key contender had it been in the competition.
The 58th edition of the world's most prestigious film festival wraps up Sunday with encore screenings of the winners and runners-up.
The festival's closing film, British director Martha Fiennes' comic drama "Chromophobia," premiered immediately after the awards. The ensemble cast included the director's brother, Ralph Fiennes, plus Penelope Cruz, Kristin Scott Thomas and Ian Holm in the story of a dysfunctional family coming apart at the seams.