Seavey, 43, of Seward crossed the finish line just before 10:30 p.m. His previous best finish was fourth in 1998.
"I'm sort of in disbelief," Seavey said. "I think everybody's happy to have an Alaskan boy win the Iditarod."
Hundreds of people, clapping and cheering, were gathered on Front Street in Nome to welcome Seavey into the winner's chute.
Three-time winner Jeff King of Denali Park was at least an hour behind.
"This dog team is awesome," Seavey said. "I knew if I didn't make any big mistakes - this dog team is a monster. I knew they could do it."
Seavey, who was born in Minnesota and moved to Alaska before he started school, had said he's always dreamed of winning the Iditarod - and as a boy, used to pretend he was the winner, as he raced around his house with a three-dog team.
While Seavey was pleased with the way his race went, it wasn't an easy ride.
"We have tougher races somewhere else, but I'm not sure where," the sleep-deprived musher said.
Seavey told The Associated Press in an interview in 2001 that his dream of winning the race began as a child when he listened as his father, Dan Seavey, helped plan the first commemorative race to Nome in 1973.
The boy grew up to be a full-time dog sledder - operating a sled dog tour business with his family for the past ten years.
The Iditarod, the longest sled dog race in the world, commemorates a 674-mile relay race from Nenana to Nome in February 1925 when dog teams successfully delivered serum to prevent an outbreak of diphtheria among children.
A record 87 mushers and over a thousand dogs participated in this year's race, which had its ceremonial start March 6 in downtown Anchorage.
The Iditarod has prize money of more than $700,000. The first-place prize is $69,000 and a new Dodge pickup truck worth $41,410. About one-third of this year's record field were rookies.