Priyanka Chopra was the last winner from India in 2000.
Chillar, 21, looked emotional as the crown was placed on her head by Miss World 2016 winner Puerto Rico's Stephanie Del Valle.
She competed against 108 contestants from various countries at the pageant.
Manushi Chillar, born to doctor parents from Haryana, studied at St. Thomas School in Delhi and Bhagat Phool Singh Government Medical College for Women in Sonepat.
In an interview during her grooming, she said: "The only thing I believe is certain in life is uncertainty, and this is what is amazing about the pageant."
Apart from the title, Chillar also won the Beauty with Purpose award.
Chillar had earlier this year won the Femina Miss India 2017.
Bangladesh's Jessia Islam was dropped after reaching the round of last 40.